Posted by Joe C. (AR) on February 07, 2003 at 15:02:52:
“intent to sell for profit” is the key language in the requirement. They specifically mention “lease/options”. IMHO you could probably do 1 or 2 the way you suggest, but if somebody turns you in or makes a complaint, you have left a paper trail. It’s a risk. You have to decide if the risk is worth the reward. It may be for you. Pesonnally, if I didn’t have a license, I would buy for cash, keep my name off the title, get the seller to sign it without a buyer’s name filled in, and fill my buyer’s name in when I was paid in full. It’s still a risk if there is a complaint to the MH Commission, but at least there is nothing connecting you to other deals. Not foolproof but maybe less risk for a while. If a licensed dealer gets wind of what you’re doing and hears of more than one, you could still have to defend yourself.
I don’t advocate this method as evidenced by my compliance with the requirements, but it is less risky than what you have suggested.
Joe C. (AR)
Here’s what I want to do to avoid licensing. - Posted by pete(AR)
Posted by pete(AR) on February 06, 2003 at 14:53:21:
I’d like your input to see if my scenario to avoid dealer licensing in AR is credible or not. The reason I don’t want to get a license off the bat is I’d like to see if this is the business for me or not. Plus I don’t have lots of money to get a license. Here goes.
I will cash purchase a mobile home from a seller and take title to my name.
I will establish an LLC to obtain liability protection.
I will go to the DMV, and transfer title from myself to my LLC. There may be a transfer tax of course.
My LLC will enter into a net lease/option purchase agreement with the buyer.(Using Ernest Tew’s forms)
When the option is to be exercised, transfer the title from the LLC back to me. Transfer tax again.
Then transfer title from me to the buyer.
Thus, no need for a license. Also, in AR a dealer license is not required to sell a mobile home as long as the MH is titled to you personally. Of course, my thinking may be flawed somewhere. I’d love to hear from the experts.
Re: Here’s what I want to do to avoid licensing. - Posted by Jim (FL)
Posted by Jim (FL) on February 08, 2003 at 08:34:13:
Pete,
If you sell more than one a year, I think you would still be considered a dealer. Remember not only do you have to be concerned about the state you live in, you MUST consider IRS rules. If the IRS views (in their opinion) you as a dealer,then tax is due on the sale in the year of the sale even if you are collecting the payments over several years. This can crush you if you do several deals in a year, which is what we want to do. I’m NOT an attorney nor a tax accountant, but here’s what I do after researching these topics in depth:
Buy the home, do the repairs, prep it “for sale”
Sell the home “rent to own” using 3 seperate documents. (lease, option to purchase, sale agreement)
A. I do a standard 3yrlease, with no mention of “sale”, “deposit” or “down payment”. This documents my “intent” to be a landlord.
B. I sell the “tenant” an “option to purchase”, upon the successful completion of the lease, for $1000. This is “option consideration” and is NONREFUNDABLE whther they buy the home or not. Both state law and the IRS do not view option money as a downpayment or deposit, both of which could be court ordered to be return if the buyer backs out on the deal. Do NOT use the terms “downpayment or deposit” anywhere in your lease or the option agreement!
C. If the tenant successfully completes the lease you sell them the home (owner financed) as stated in the option agreement. I arrange my sales agreement to have the monthly payments remain the same as the period of the lease. By the way, I’ve not had to sell one yet and I don’t want to because I want the MH back so I can do it again. Here’s a breakdown of the money:
3yr lease ($400 mo.) above lot rent $14,400
Option consideration ($1000) 1,000
Owner finance sale agreement 2yr ($400 mo.) 9,600
=======
Total received $25,000
Here’s the best part, if the sale takes place I only have a taxable gain of $9600-$5000 (my cost basis on the MH)= $4600 in the year of the sale vice a $20,000 gain if I were a “dealer”.
I will stagger my deals so I never sell more than one in any year. I’m NOT cheating anyone, I’m taking advantage of the law and the tax code as it is currently written. I read Lonnies books and Ernest Tews course and combined the best of each into this system. Some of you might think there is no way to get $25,000 for a $5,000 MH, but you would be wrong! I have done this repeatedly and my “tenants” LOVE this deal. Why? In FL MH’s are taxed like cars, if they "bought the MH for $25,000 in the beginning they would face a tax of $1750(ouch). By renting first and then buying the MH for $6900 they only pay $483 in tax. If you tell them you will save $1,267 my way they will be happy you are “helping them”. I get what I want out of the deal and the “tenant” feels like a home owner and is very happy to save over a thousand dollars on the MH!
Re: Here’s what I want to do to avoid licensing. - Posted by Jim (FL)
Posted by Jim (FL) on February 08, 2003 at 07:43:05:
Pete,
If you sell more than one a year, I think you would still be considered a dealer. Remember not only do you have to be concerned about the state you live in, you MUST consider IRS rules. If the IRS views (in their opinion) you as a dealer,then tax is due on the sale in the year of the sale even if you are collecting the payments over several years. This can crush you if you do several deals in a year, which is what we want to do. I’m NOT an attorney nor a tax accountant, but here’s what I do after researching these topics in depth:
Buy the home, do the repairs, prep it “for sale”
Sell the home “rent to own” using 3 seperate documents. (lease, option to purchase, sale agreement)
A. I do a standard 3yrlease, with no mention of “sale”, “deposit” or “down payment”. This documents my “intent” to be a landlord.
B. I sell the “tenant” an “option to purchase”, upon the successful completion of the lease, for $1000. This is “option consideration” and is NONREFUNDABLE whther they buy the home or not. Both state law and the IRS do not view option money as a downpayment or deposit, both of which could be court ordered to be return if the buyer backs out on the deal. Do NOT use the terms “downpayment or deposit” anywhere in your lease or the option agreement!
C. If the tenant successfully completes the lease you sell them the home (owner financed) as stated in the option agreement. I arrange my sales agreement to have the monthly payments remain the same as the period of the lease. By the way, I’ve not had to sell one yet and I don’t want to because I want the MH back so I can do it again. Here’s a breakdown of the money:
3yr lease ($400 mo.) above lot rent $14,400
Option consideration ($1000) 1,000
Owner finance sale agreement 2yr ($400 mo.) 9,600
=======
Total received $25,000
Here’s the best part, if the sale takes place I only have a taxable gain of $9600-$5000 (my cost basis on the MH)= $4600 in the year of the sale vice a $20,000 gain if I were a “dealer”.
I will stagger my deals so I never sell more than one in any year. I’m NOT cheating anyone, I’m taking advantage of the law and the tax code as it is currently written. I read Lonnies books and Ernest Tews course and combined the best of each into this system. Some of you might think there is no way to get $25,000 for a $5,000 MH, but you would be wrong! I have done this repeatedly and my “tenants” LOVE this deal. Why? In FL MH’s are taxed like cars, if they "bought the MH for $25,000 in the beginning they would face a tax of $1750(ouch). By renting first and then buying the MH for $6900 they only pay $483 in tax. If you tell them you will save $1,267 my way they will be happy you are “helping them”. I get what I want out of the deal and the “tenant” feels like a home owner and is very happy to save over a thousand dollars on the MH!
Re: Here’s what I want to do to avoid licensing. - Posted by Jim (FL)
Posted by Jim (FL) on February 08, 2003 at 07:39:32:
Pete,
If you sell more than one a year, I think you would still be considered a dealer. Remember not only do you have to be concerned about the state you live in, you MUST consider IRS rules. If the IRS views (in their opinion) you as a dealer,then tax is due on the sale in the year of the sale even if you are collecting the payments over several years. This can crush you if you do several deals in a year, which is what we want to do. I’m NOT an attorney nor a tax accountant, but here’s what I do after researching these topics in depth:
Buy the home, do the repairs, prep it “for sale”
Sell the home “rent to own” using 3 seperate documents. (lease, option to purchase, sale agreement)
A. I do a standard 3yrlease, with no mention of “sale”, “deposit” or “down payment”. This documents my “intent” to be a landlord.
B. I sell the “tenant” an “option to purchase”, upon the successful completion of the lease, for $1000. This is “option consideration” and is NONREFUNDABLE whther they buy the home or not. Both state law and the IRS do not view option money as a downpayment or deposit, both of which could be court ordered to be return if the buyer backs out on the deal. Do NOT use the terms “downpayment or deposit” anywhere in your lease or the option agreement!
C. If the tenant successfully completes the lease you sell them the home (owner financed) as stated in the option agreement. I arrange my sales agreement to have the monthly payments remain the same as the period of the lease. By the way, I’ve not had to sell one yet and I don’t want to because I want the MH back so I can do it again. Here’s a breakdown of the money:
3yr lease ($400 mo.) above lot rent $14,400
Option consideration ($1000) 1,000
Owner finance sale agreement 2yr ($400 mo.) 9,600
=======
Total received $25,000
Here’s the best part, if the sale takes place I only have a taxable gain of $9600-$5000 (my cost basis on the MH)= $4600 in the year of the sale vice a $20,000 gain if I were a “dealer”.
I will stagger my deals so I never sell more than one in any year. I’m NOT cheating anyone, I’m taking advantage of the law and the tax code as it is currently written. I read Lonnies books and Ernest Tews course and combined the best of each into this system. Some of you might think there is no way to get $25,000 for a $5,000 MH, but you would be wrong! I have done this repeatedly and my “tenants” LOVE this deal. Why? In FL MH’s are taxed like cars, if they "bought the MH for $25,000 in the beginning they would face a tax of $1750(ouch). By renting first and then buying the MH for $6900 they only pay $483 in tax. If you tell them you will save $1,267 my way they will be happy you are “helping them”. I get what I want out of the deal and the “tenant” feels like a home owner and is very happy to save over a thousand dollars on the MH!
Re: Here’s what I want to do to avoid licensing. - Posted by Jim Schad
Posted by Jim Schad on April 15, 2003 at 15:39:15:
Will this work in a park that requires ownership by tenant? No rentals they say. Is this considered a rental in the initial period or a sale that just has not been excercised? I like the tax savings of course.