good idea to me but you might want to add in a prepayment penalty so you don’t loose money if someone pays off early. ie lower interest higher sale price locks in a certain amount of profit and annother part of maby profit ex buy 1000 sell 2000 interest 0 term 12, you just made 1000 off of your investment right. (forgive the math no calculator right now) same home buy 1000 sell 1500 interest 10% term 12. in example one you make a grand and get your money back in six months. in example two you make 582 dollers and you get your money back in the midle of the 7th month. in order to make 1000 dollers like in the first example you have to extend the payments. my point being that early payoff will kill your profit and on top of that if you decide to jack up the interest to compensate for this you will loose sales to people who actually would have paid your price but were scared off by the high interest. people are trained to feel like if they are paying more interest that they are being cheated. in reality they are not paying anything different. besides what is the difference how much you have to pay in taxes? first you have to earn it before you have to pay right. i said earn not recieve. on top of that Doc has given alot of info lately on how to get out of taxes too bad for uncle sugar.
Posted by Tennessee Bob on July 02, 2002 at 10:32:14:
Does it make a differance??
If I buy a MH for say $3500 and sell it for the total of $7000 plus $1369.99 which is the interest earned at 12% for 36 months. In other words, the actual sale price would be $8369.99. This way I dont have to show the interest as income. This will however increase my capital gains tax.
Would it be better to charge a higher interest rate and decrease the sale price proportionatly. This way, at the end of the 36 months my total investment return is the same, the capatal gains tax is lower, but I have to show income on the interets earned.
Just thinking outloud.
Posted by Ernest Tew on July 03, 2002 at 11:33:42:
Bob,if the income you earn is reported correctly, it doesn’t make any difference whether it comes from interest or gain on the sale of mobile homes. As a dealer (anyone who buys with the intent to resell), is required to pay taxes on the entire selling price in the year of sale. If you buy and sell very many mobile homes, the taxes you are required to pay could exceed the down payments you receive from your buyers.
Fortunately, there is a better way. It is to enter into a net lease and an option to buy. Instead of a down payment, they pay for an option (the right to buy). Instead of principal and interest payments, the occupant pays rent.
Since you haven’t sold, there is no gain to be taxed. Moreover, since you are renting the mobile home, you can take depreciation deductions to shelter part of the rental income.
Of course, you will want the occupant to think of themselves as owner by incorporating in the lease and option agreements all the rights and responsibilities of an owner.
The lease and option forms, along with a more detailed explanation, are included in How To Get Rich Helping Others, available through CRE. Or, if you want only the forms, please send me an email.