Posted by ScottS on October 18, 2002 at 12:24:25:
John,
You are absolutely correct I must have been spacing when I read the original post. Thanks for pointing it out.
ScottS
Legal to buy with L/O, sell using land contract? - Posted by Steve (CA)
Posted by Steve (CA) on October 11, 2002 at 22:02:26:
I’m very interested in this approach, but a bit skeptical. BB says you can do it, but advises having the seller commit in writing to not depreciating the property, or having your buyer agree to not take interest deductions.
It’s the ‘equitable interest’ part that gets me. It’s my understanding the a lease with an option does not give an equitable interest as the option is a unilateral agreement until exercised. A land contract, on the other hand, definitely gives an equitable interest.
So how could I, as a ‘sandwich’ investor, give something I don’t have? Also, what if I lease option one of my houses and my tenant sells with a contract? Now I have a potential judicial foreclosure on my hands if the new occupant defaults. Does the prohibition against sub-leasing in my agreement protect me? If not, what’s best defense?
-Steve
Buy with L/O, sell using land contract? - Posted by JHyre in Ohio
Posted by JHyre in Ohio on October 15, 2002 at 12:33:53:
I think its legal in most states…qualified local counsel should have the correct answer. My interpretation of OH law: You can do it, but are liable to the buyer if you cannot obtain title from the lessor/option maker. The key: YOU are on the hook for lease payments EVEN IF the land contractee does not pay - you NEED a reserve in place! Also, make sure that you can enforce exercise of the option (e.g. - held by a trustee or escrow and delivered to you upon complete payment)…Bill has discussed enforcing an option in his courses. Also, be sure that you give yourself enough TIME to exercise the option (e.g. Land contractee must provide 90 days notice of intent to prepay, etc.).
John Hyre
Re: Buy with L/O, sell using land contract? - Posted by ScottS
Posted by ScottS on October 17, 2002 at 16:10:40:
John,
I’m quite surprised you, being a tax attorney, did not mention the tax issues related to this type of transaction.
I’d want it to be quite plain to all parties invovled who was getting the tax benefits. The Landlord/Seller taking depreciation and a Installment sale buyer taking home interest deduction on the same property might get interesting.
Any wisdom to share?
ScottS
Re: Buy with L/O, sell using land contract? - Posted by JHyre in Ohio
Posted by JHyre in Ohio on October 17, 2002 at 16:16:17:
I agree with you that one or the other gets the interest and depreciation…which is what I think the original post was saying.
John Hyre