All Forum Posts by: Bill Walston

So...I'm not privy to your specific tax situation, but based on what you've laid out in your post this reads more like a purchase than a lease with an option.  The Service would look at substance over form.  If you haven't already, you should check with your accountant on how he suggests you "book" this transaction.

You don't use a trust?

@Matt Lord, if you transfer the property from yourself to an LLC (a new entity) you are subject to the transfer tax - no way around that. However, it's my understanding that you can transfer that property to a trust without tax. You could later assign the beneficial interest to another party (the LLC).

@Steven Hill, yes.  You CAN have multiple-extensions of leases.  That's not the problem.  The problem is that you're applying the "lease payments" to the purchase price so that the property is "paid for" after a certain period of time. THAT is the very definition of a "disguised sale" according to the Service.  Could you do it and it not be discovered?  Possibly.  But if discovered the Service can ding you for not reporting the sale, the court can rule that your "tenant" now has equitable interest in the property, and, finally, you've likely committed a Dodd-Frank violation.  Were I you, I'd simply do a contract for deed or properly structure the deal as a  lease and option transaction.

@Victor Umeh, I think you should definitely have the current mortgagor listed on the insurance policy UNLESS the current policy doesn't include him/her.  Since the property is already in a trust the policy may be in the name of the trustee - as it should be.  Since the property is already in a trust, have you considered simply buying the beneficial interest?  That's the beauty of using trusts for real estate transactions.

So @Adam Carrillo, if you're going to be owning rental property I'd suggest you don't use a corporation at all. Real estate should NOT be held in a corporate entity. Use an LLC instead and select the default tax status.

@Adam Carrillo, what business are you in?  Is the 90K-120K earned income?  Rental income?  Just what is it that you do?  Entity selection is based, in part, on the type of income generated and the type of business that you own.

First, let me say that I've known @Account Closed, she began notifying folks months ago that the price of the program would be increasing to $997 since the content modules were being updated, a coaching component was being added, and a software program (that was a stand alone product costing $197) was being incorporated into the package.  Frankly, speaking as a former student and one who knows the results that can be achieved if the program is implemented - it's a steal at this price.

@Tim Ivory, I think you mean SELLERS will negotiate, correct?  And that *may* be true, but why would a seller want to renegotiate a price when he has a price locked in that the buyer must pay IF he wants to exercise his option?  And if the buyer is bringing in his own financing, which is the usual case, why would the seller care from where the money comes? And if the buyer chooses NOT to exercise his option, the seller is free to offer the property to another buyer, possibly at a higher price.

@Tim Ivory, 

The profit centers with a SLO are: non-refundable option fee, monthly cash flow, and backend profit when the tenant exercises his option. (I'm not sure what you mean by "renegotiating the final price." The price is set when you sign a lease and option agreement with your tenant. There usually is no "renegotiating."

Why are you concerned with, what you call, the "accrued equity?" Perhaps you are still confused about the process. Remember, you negotiate a purchase price with the seller. That is fixed. That's what you pay for the property when, and if, you exercise your option. You negotiate a price with your tenant that, in most cases, will be higher than the price you set with the seller. That is fixed. That's what your tenant will pay, when, or if, he exercises his option. The difference between the two is known as your "backend spread."

Once the lease and related option expires without being exercised the deal is done. Yes, you are out of the picture - unless you are granted an extension by the seller. And yes, that IS possible. But don't forget, the "seller" wants to get rid of his property. Why would he want to continue granting you extension after extension and continue to be a landlord?