The passive income comes from the both the price premium and note fees applied to a land contract. Similar to financing a car. I might flip land at 1k/acre for cash, or sell it on terms for 1.3K/acre. Let's say 500 down, 150/mo for 84 months with a $10 note fee every month. If the buyer defaults on the note, you can simply sell it to someone else. The land doesn't get deeded to the buyer until the terms have been met.