Income taxe planning on owner financed wholesale/flips

[Mike W.]

New to the board here but have been reading for years. I am a seasoned (25 year) real estate investor and broker. I have searched this forum for answers and discussions but have not found anything so here goes...

For all of you wholesale real estate guys who specialize in owner financing, especially the land guys who now are so common, how do you handle your income taxes on the sale? My CPA has always indicated that as a land dealer, I lose the ability to 1) 1031 and 2) treat the sale as an installment sale for tax purposes. In other words even if I owner finance for 3-5 years, I have to pay the entire tax nut in the year I sell.

In this case, just as an example, if I buy a 15,000 lot for $1000, sell it for $6,000 and owner finance it, I will owe taxes on roughly $5000 in profit or $2000-$2500 in taxes. If I get little down payment and low monthly payment as many of the land wholesalers do, my annual cash flow will be negative  potentially depending on payment amount and when I start getting payments and when taxes are due.

My question is this, are all you  owner financing wholesalers  paying the income tax in the year of sell even if owner financed and how do you handle this unless you are starting out with a ton of cash?