Posted by Ernest Tew on September 16, 2003 at 07:00:42:
John, since the property you describe includes the land, it would be classified as real estate. But, when closing the purchase, be sure that the title to the home is transferred to you or the entity you choose.
While there are several ways to do it, here is how I have done a few similar transactions:
For the mobile home, I enter into a Net Lease Agreement and an Option To Buy Agreement. Because most of the risk is in the mobile home, most of the customer’s available cash is used to pay for the option (for example, $1,500).
Then, I sell the land for a small down payment and interest only for about ten years. About $500 is used for a down payment on the land. After allowing for interest only on the mortgage (secured by the land), anything else is used for mobile home payments.
By allocating much of the price to the land, the price of the home will appear more attractive and the customer may never pay off the land. (Interest has the same effect as rent.)
Using this approach, there will be no sales tax on the mobile home and little or no property taxes. Provided a Florida homeowner has title to the land and is living on it on January first, they will be entitled to a $25,000 homestead exemption. That will probably eliminate the property taxes that you would be required to pay if the land were leased. Furthermore, you will be entitled to depreciation deductions on the mobile home and installment reporting as opposed to being required to pay tax on the entire gain in the year of sale.