How to avoid getting a TX dealers license - Posted by Steve

Real Estate Investing Mobile Homes & Mobile Home Parks
#1

Posted by Brian-TX on May 22, 2007 at 24:06:12:

Not shooting down your idea or anthing of the sort, but some things to consider off the top of my head:

You mention wanting to be a fast dealer getting X amount of deals done a year. That $300 a pop will start adding up fast if you create a new entity for every deal. 12 * $300 is $3600. Granted its a one time expense. This gets you 12 deals a year in your plan. What will tax time be like with 12 entities? Is it a separate form per LLC?

Also, what happens if you sell a home under one of you LLC entities, and that home comes back to you in 6 months? Wont you have 6 months of holding costs until you can sell under that entity again? Otherwise, you would be selling more than one home a year under the same entity, and the state might frown on you. How much will that cost in lot rent?

What happens if you get an irate owner for some reason and they report you to TDHCA? What will they think when they do some investigation and find you are “legally cicumventing” the rules? Perhaps nothing, and perhaps they have no jurisdiction over you since technically you are unlicensed, and therefore it is a consumer to consumer transaction.

I would definately bounce this off a lawyer. I would be interested in hearing what you find out as well.

Just an FYI, we have only done one deal, and we are not licensed (although I did attend the class in Austin). I have also heard it is not that difficult to get your bond location changed if needed. I do think the laws here in Texas are not very Lonnie deal friendly. This could both be a good, and bad thing if you really think about it.

If we do another deal, we will more than likely do it under another entity, or in a family members name. $1250 is quite a bit to spend yearly when you only have a couple of deals going.

Brian

#2

How to avoid getting a TX dealers license - Posted by Steve

Posted by Steve on May 21, 2007 at 17:16:07:

I’ve been reading over the posts on TX mobile home dealer licensing…and wow…its interesting reading what everyone has discussed. I’m trying to think creatively here…what do you guys think about these ideas to legally avoid getting a TX dealers license.

IDEA #1 - Rent or lease the mobile home; BUT have the renter be responsible for maintaining it and give them the chance to buy the home at the end of the lease for 10% of the value of the home. This is not a lease option, but a real “lease to own” plan. Since it’s hard to judge the FMV of a ‘really’ used mobile home, you can more than likely get away for selling it at 10% of your [big] note value under IRS lease-to-purchase rules. Obviously if you sell more than a home or two in one year this way, you’d probably need to become a dealer per TX law. However…as soon as a renter is late by even a couple days on say a 3 to 5 year lease - you can kick them out of the home / evict them. In the end you’d hope not too many people would buy from you. It sounds bad, I know, but technically you’re being fair and the law is on your side…so I think. Opinions?

IDEA #2 - Form an LLC [real, real easy once you know how to do it and only $300 a pop] - a seperate entity - for each mobile home or for every two mobile home deals / Lonnie deals. Texas will view each LLC as a seperate entity, while the IRS will view each LLC as a pass through entity [assuming using the check-the-box option you choose to file as a sole prop]. Basically if you create dozens of LLCs to do dozens of deals per year, in the end they just get put on your single schedule C. You could have that LLC do multiple deals over the years, so the initial $300 investment per LLC would be worth it. Downfalls? To evict someone you will need to hire a lawyer [TX law, from what I’ve been told by a lawyer friend, says that in most cases an LLC and corporation must represent themselves in court - while an individual usually does not]. But most people would probably hire a lawyer for that anyway. Opinions??

Thanks for your feedback…Steve

Any feedback would be appreciated. I’m not trying to break the law, just use creative workarounds.

#3

Re: How to avoid getting a TX dealers license - Posted by James

Posted by James on June 22, 2007 at 15:31:13:

Maybe I missed something and ya’ll can fill me in… I just read through the TDHCA website and I did not see the $1500 or $1250 licensing fee that I am seeing here…
I saw the $250 course fee and then on the retailer license fee was $275…
That is $525
What am I missing?

#4

Get the License - Posted by Kenneth Hocking

Posted by Kenneth Hocking on May 25, 2007 at 24:50:55:

Point to consider is do a deal…You might soon find… Just because you are an investor and not a DEALER does not mean the State will find you so Disconnected even if the IRS does… It is best to take the 3 day class and get it if you think you want to do this BIZ… you will get access to lots of inventory that are DEALER only from the finance companies…

BTW has anyone actually gone to Texarkana and seen just how many Homeland Security MOBILE HOMES are left?

#5

Re: How to avoid getting a TX dealers license - Posted by Brian-TX

Posted by Brian-TX on May 22, 2007 at 24:31:50:

I have replied again down below on your ideas, but before this gets deeper, I think there is one thing you should consider before you start getting lawyers involved and come up with all these creative ways of skirting the rules…

Go do a deal! Have you done one yet?

All this discussion of setting up multiple entities and such is moot until you have actually done a deal and determined if it is something you want to persue further.

Its easy when you are starting out to daydream about all the possibilities of what could be, but don’t let it distract you from what is really important, and that is DO THE FIRST DEAL.

In Texas, we can legally do one deal a year, so get that done before you worry about how you can do 12 a year.

Brian

#6

Re: How to avoid getting a TX dealers license - Posted by Brian-TX

Posted by Brian-TX on May 21, 2007 at 21:21:04:

I guess one question I would have, is why do you wish to not get a dealers license? Do you think the license will in some way hinder your business? Do you not like the costs?

Not saying what you are trying to do is good or bad, just like to know your motivation.

Brian

#7

Re: How to avoid getting a TX dealers license - Posted by Steve

Posted by Steve on June 23, 2007 at 05:50:12:

It’s been a month or two since we discussed this, so I plain forgot. I think you’re right in regards to the initial fees - it’s probably insurance or something else the guy is including in his figures. If you do some searching in the Archives you’ll probably find what he was referencing

#8

Re: How to avoid getting a TX dealers license - Posted by Steve

Posted by Steve on May 21, 2007 at 21:55:51:

Well say I get a TX dealers license. That’s $1500 in initial costs + probably $1250 a year thereafter. Those are business expenses that basically go straight down the drain. LLC fees pay for the entities that I can use again & again - you might say they become non-tangible assets to me or the parent company that owns them. They continue to let me legally circumvent becoming a licensed dealer on a year to year to year basis.

Now the $1500 in initial costs + $1250 a year thereafter is an assumption as of now - just based on what I’ve read. Those fees assume I just get one license. I’ve seen 2 different message posters say different things on how to properly do Lonnie deals in Texas…you can (a) get a normal license along with a seperate floating license or (b) have the state & your bonding agency change the address of your business on file each time you want to make a new deal [big pain in the butt, though doable, and the time involved waiting for the changes to go through might affect your ability to close X amount of deals per year if you’re a fast dealmaker like I will want to be]. If you know how to do Lonnie deals in Texas, please clarify this for me. =)

I personally like the idea of being free from any chains and owning X amount LLC’s to start, which I can use again & again in time. Adding more would be easy. And the costs are one-time.

But then, I need to bounce this off a lawyer and other investors to see if it’s legal.

I’m very anxious to do some serious Lonnie deals if they’re doable here. It sounds like the are…its just a matter of finding out exactly what needs to be done.

#9

what if what if what if - Posted by Steve-WA

Posted by Steve-WA on May 22, 2007 at 10:15:58:

Cheeze and rice, go do a deal first!

You will find that if, and its a big if, this is to your liking, then a dealer’s license is the easiest, most efficient way to do business.

Skirting the law all nancy-pants will make you look like a fool, a shyster, and is not the way to go.

The licensing costs are jsut a cost of doing business - bit player in the big picture.

GOTC!!!

(Boy, haven’t said THAT in awhile! That felt good!)