Posted by Keith (OH) on May 15, 2006 at 13:25:37:
If you are leasing your homes then you wouldn’t be a dealer or a lender, simply an investor with a portfolio of rental homes. And a number of investors use this technique to avoid the dealer status. However, as I see it the complications could arise when and if the buyer exercises their option to buy the home.
With a normal L/O there is no note. Your are getting “rent” every month with a portion of the rent going towards the sale of the home. If the tenant eventually exercises their option to purchase the property you are right back to dealer status in the year the home was actually sold even if you then create a note for the sale. Keep in mind, though, most states (and the IRS) will allow a few sales per year without deeming you a dealer. So if your tenant/buyer never exercises their option (probable)or if you ultimate sales are staggered in different years you won’t have a problem, IF your state allows a handful of sales per year.
Just my opinion,