Posted by Bronchick on March 30, 2000 at 21:32:54:
No, the Cash Cow Course
How do you set up a land contract? - Posted by Tom Trafton
Posted by Tom Trafton on March 30, 2000 at 16:00:17:
I have a property that I would like to sell on a land contract and I am not sure how to set it up so that I can maximize my profit? Property has a FMV of 85,000. I have a 6.75% VA Vendee Loan with payments of $521/month. Loan bal is 67,000. I’m more concerned with monthly cash flow than cashing out. Can anyone help me with this transaction?
An excellent opportunity for you! - Posted by William Bronchick
Posted by William Bronchick on March 30, 2000 at 16:58:50:
I would mark the price 10% above market, take a 10% down payment and ask for 11%. This will provide you with a lifetime of cash flow.
A land contract does not trigger the due on sale provision of a VA mortgage, so it can be recorded. I wouldn’t, if you can get away with it.
Land Contract Tax Consequences - Posted by Jim-WI
Posted by Jim-WI on March 30, 2000 at 18:17:01:
Just a question… I saw something in Mr. Landlord’s email newsletter about installment method of reporting real estate sales… I’ve posted it below…
I know with small businesses… if you sell via installment sales ie land contract there is a law that says you need to pay all of the taxes upfront… in the first year!
Is this the same with real estate land contracts? Do you pay all of the taxes upfront in the year of the first sale? I guess I don’t fully understand the law and would like some clarification.
Thanks!
TAX RELIEF EXTENSION ACT OF 1999
Installment Method of Reporting Sales of Real Estate Property: If a taxpayer is required to use the accrual method of accounting, then they are prohibited from using the installment method for reporting the income. This will NOT affect most investors who own
rental or other non-dealer property. It will affect most dealers. If a dealer has both long-term rental property and dealer inventory property, then generally he/she is required to be an accrual taxpayer and cannot use the installment method to report the sale of even the long-term rentals. This is all the more reason NOT to have dealer businesses own long-term capital gain property, such as rentals.
The case against accrual - Posted by Bert G
Posted by Bert G on March 30, 2000 at 21:41:08:
When my brand new CPA (Ink is still wet on her diploma) did my initial corporate return, she used the accrual method. I saw that & said I really didn’t want to do that. She said, “you didn’t make any money this year anyway, its not a problem”. OK, How about next year? Can someone give me a good arguement I can use to convince her that the CASH method is in my best interests?
BG
Re: Land Contract Tax Consequences - Posted by William Bronchick
Posted by William Bronchick on March 30, 2000 at 18:55:36:
Only applies to businesses that report on the accrual method of accounting. If you report on the cash method, as most small businesses do, it will not be an issue. If the IRS pegs you as a “dealer” corporation, you cannot use an installment sale anyway. There are many ways to get around and/or deal with this, as discussed in my course.
If you search the archives here, I did post an excerpt about a month ago on this exact issue.
Re: Land Contract Tax Consequences - Posted by tb
Posted by tb on March 30, 2000 at 19:33:28:
Bill, would that happen to be your Bulletproof Corp. course you are referring to?
Thanks. tb