We are currently doing exactly that with a property we own. Our buyers bought one of our properties, with a traditional bank loan, so we felt good about their credit. Also, we got to know them quite well over the course of working out the details and selling them the first property. We entered into the deal last November. So far, so good! We did have an attorney draw it up.
We will do it again, in the future, on other property. You can get a much better return on your money than other investments, plus it's better than renting it out because the "buyer" is responsible for repairs, etc. (assuming that is how the contract is written).
Oh...our down payment was sizeable enough that we feel covered in case of damage.
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