Cash Sales vs Terms Deals – Which is Right for You?

Today, we’re diving into a hot topic on land investing strategy: the choice between cash sales and terms deals. It’s a question that affects your workload, your cash flow, and ultimately, the success of your business.

Land Academy founders Jill DeWit and S. Jack Butala used to heavily focus on selling properties through owner financing. While seemingly lucrative with their promise of steady monthly income, terms deals have proven to be a high-maintenance way of doing business. The administrative burden of managing customer service, chasing payments, and handling the defaults can quickly become more trouble than it’s worth. The reality was a cycle of intensive labor for relatively low returns, prompting a strategic pivot towards cash sales.

Cash sales, by contrast, offer a streamlined approach. The transaction is straightforward: buy low, sell high, and repeat. This significantly reduces the admin side of your business, allowing you to focus on scaling your business and getting more mail out the door instead of micromanaging individual sales.

Here’s our takeaway:

• Terms Deals: The idea of passive income from terms deals is tempting, but they come with their own set of headaches. Dealing with payment changes, buyers who stop paying, and the endless cycle of reselling properties can really wear you down. Jill found out the hard way how emotionally draining and complicated it can get, especially when buyers disappear or can’t keep up with their payments. Terms deals do offer the benefit of consistent monthly income.
• Cash Sales: Switching to cash sales was a game-changer. It made everything simpler and let us focus on what we do best: buying land cheap and selling it for a quick profit. Cash deals mean we don’t have to deal with the hassle of managing payments or worrying about buyers defaulting. The downside to cash sales is that you need to consistently make deals happen every month to maintain your income, unlike the predictable monthly income from terms deals.

While terms sales can work for some, the efficiency and lower stress of cash sales align better with their vision of a successful land business. It’s about finding the balance that works for you, considering both the financial implications and the operational workload.

Does this mean we only teach cash sales? No. We teach both cash sales and terms transactions, but overall we have elected as a business to do more cash deals. This means we can do more deals quicker, and don’t need to deal with the admin work behind terms deals. A mix of terms and cash deals are absolutely a viable strategy so you always have residual monthly income from terms deals while getting the larger cash infusions as well.

As you weigh the options between cash sales and terms deals, consider what aligns best with your business goals and work style preferences.

Happy Investing!