Typical Lonnie deals are not my first choice(LONG) - Posted by ScottS(NC)
Posted by ScottS(NC) on May 08, 2002 at 09:43:32:
This topic is very confusing to the average person(like me) I hate figuring taxes and cringe at the mere mention of thinking about them.
With that said I have found a CPA that I think is on to something for some of us that are not exclusive “Lonnie dealers”.
Our Company’s primary mission is NOT to do Lonnies deals. It is to find land (Mobile)home packages priced cheaply. At that point we rent the whole package(if in a nice area) or just the land if in a not so desirable area.
Currently we are about 50% rentals(homes and land) and 50% sales. We buy homes with the intention of renting or lease optioning if at all possible. We own a small park and rent ALL the homes in the park. We do not have a mobile home dealers license.
What our Cpa said was he felt Very comfortable doing the installment method on our Lonnie deals. Why because we are not dealers and our primary mission is to rent. This is something he will review on an annual basis and see if Lonnie deals begin to outway rentals in volume(not if I can help it!)
I’m not going to argue or respond to the age old should I have a dealers license or not so don’t bother to even ask or comment about that, READ THE ARCHIVES!
I want all Lonnie dealers to stop and think when they get a land home package. Don’t get stuck in the mind set of the only thing I do is Lonnie the home off and rent the land. Look at Lease options,rentals(remember in Lonnies books he says He is a burned out Landlord. That Tells me: HE MADE HIS MONEY RENTING\WITH SOME OWNER CARRYBACKS, He KEEPS that money growing by Lonnie dealing. Are you all burned out Landlords?? Having somebody pay you every month to pay off your loans and let you keep the propery and get great tax advantages, show me a lonnie deal with that kind of yield! Beyond INFINITE!
I believe the market are in a constant state of change what was a great investment vehicle today might be just ok tommorow. Lonnie deals are great and have nice profits but to get rich (or financially free from J O B)doing these deal is MUCH harder than having a nice portfollio of rental propertys, Yes even mobile home rental propertys.
I am very tired of hearing all this talk about yields. I think it is a total waste of time to measure your investment this way. I could have a deal where I bought a home for $1000 and sell it for $3000 with $1500 down an infinite yield. But you only made $2000 total. This deal looks awesome until we break it down. Taxes due roughly $500, 20% of $2000 profit. Time spent talking to the PM, Showing the home, ect. Now I am much lower because time is valuable! How many $1500 deals will it take for you to retire???
Now lets look at a land home deal I just bought. Old mobile w/land .75 acre purchase price 12k. I am going to most likely rent the whole package for $450 a month my payment on the 12k are $120 a month expenses about $50 more monthly so about $180 a month for a cashflow of $270 a month while I pay off the home after that it will be about $400 a month clear FOREVER with routine maintenance of course. Now how many of these do I need to retire??? Funny the yield on this one looks worse!! But 10 of these Would finish my career as a employee. Ten of the first mentioned Lonnie deals would be 15k total.
If your goal is to get out of the JOB or to retire or build security or anything other than make some exta spending cash, I would encourage you to re evaluate you investment vehicles.
Sorry so Long Take Care ScottS(NC)