Installment Sale Method? - Posted by Jeff J

Real Estate Investing Mobile Homes & Mobile Home Parks
1

Posted by Tony-VA on May 08, 2002 at 21:40:31:

Take a run through some of the archives here about frozen pipes. You should find a good string a month or so ago about Pex piping. The plumbing pipes now in use and available at Home Depot etc. is rated to something like -95 degrees, it is flexible and easy to work with (no more sweating copper pipes) and can be bought for a good price in bulk. The pipes usually come with a lifetime warranty and the fittings a 20 year warranty. From everyone I have talked to, this stuff just works.

In fact, I believe Greg-VA just replumbed a whole trailer for $300 in material. The crimping tools run a bit but you only buy them once. Very easy for working in tight corners as well I am told. This piping is the same that is used in the new homes (Tufpex I believe is the brand name). But even old pipes, covered with insulation and some heat tape in the colder climate, coupled with leaving the heat on a bit should keep you safe.

Tony-VA

2

Installment Sale Method? - Posted by Jeff J

Posted by Jeff J on May 07, 2002 at 18:57:48:

I looked through the archives, but couldn’t find a specific answer.
(1) What determines if you are a dealer or have dealer status?
(2) I know the installment sale method won’t work for dealers, but will it work for part time investors like myself?
(3) Any other tax ideas, I know the Lease/Option is a good alternative, but some of the PM’s in my area won’t allow it in their parks. They think it is subletting or subleasing. Any ideas on how I might explain the differences?

Thanks again for you help, with each question comes a truckload of experiance from this site!

Happy Investing,
Jeff

3

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:

Jeff,

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)

4

Here are the tax posts … - Posted by Jerry Freeman

Posted by Jerry Freeman on May 08, 2002 at 08:10:23:

… from John Hyre. There were two:

http://www.creonline.com/mobilehomes/wwwboard4/messages/4427.html This is the original post in January, 2001 by John Hyre, Esq. about using the cash method and avoiding the artificial income tax hit from Lonnie deals.

http://www.creonline.com/mobilehomes/wwwboard4/messages/11280.html This post is a continuation of the same discussion, brought up to date as of December, 2001. It contains important additional information about when expenses for “supplies” (included the home itself) are counted for tax purposes, plus discussion of how the cash method tax strategy is working for people who’ve actually used it.

Best wishes,
Jerry

5

Re: Installment Sale Method? - Posted by Lyal

Posted by Lyal on May 07, 2002 at 22:08:35:

Jeff,
Search the archives (here and the legal forum) for posts by J Hyre. He has discussed this subject extensively.
All the best, Lyal

6

One of the best posts I have EVER read - Posted by Dave Baker

Posted by Dave Baker on May 09, 2002 at 24:51:12:

I am in the same boat…I bought DOW and read untold hundreds of posts and the Lonnie method will probably work well. The problem is what you stated…The length of the income stream is very limited…You have to continue to do hunt for and deal with Lonnie deals.

I bought a mobile on 2.3 acres, and am in the process of adding another. I rent it for enough to pay the payment on the place we live in and it…Sure, I have had to replace plumbing and a fridge,etc…But it is still worth it because I can write essentially every bit of it off on taxes. I live less than a mile from the rental, so keeping up with the place is easy as well.

Being a landlord has it’s aggravation from time to time but so do Lonnie deals…AND I still own everything. The renter pays me every month and I pay the bank…She is essentially paying my house off. Doc recently stated that renting is the real long term moneymaker and I believe him.

Cut and paste this post from Doc:

http://www.creonline.com/mobilehomes/wwwboard4/messages/11454.html

and this one:

http://www.creonline.com/mobilehomes/wwwboard4/messages/14890.html

Dave Baker

7

Re: Great message – maybe deserves new thread? - Posted by Indiana Bob

Posted by Indiana Bob on May 08, 2002 at 14:39:45:

Scott,

I just wanted to say that your posts are always a great read. Full of lots of information and little fluff or argument. Thank you for all the knowledge you have passed on. I like the idea of these land/home packages a lot, and after finishing my first Lonnie deal, I am beginning to “see the light” in terms of long term cashflow versus the 3 year payout.

Bob

8

Re: Typical Lonnie deals are not my first choice - Posted by George

Posted by George on May 08, 2002 at 12:31:12:

I have just started my REI career. I have looked at a couple of MH situated on a private lot with garage etc. My thought was to sell the MH and rent the land to the MH buyer. If the price is right, I think this would be a great way of cash flow forever.
In NYS, having a MH is considerable amount of work to ready them for that 5 or 6 months of bad weather we have in this area. I do not wish to deal with that, but owning the land makes a great deal of sense to me.
The ultimate question is, will I be able to find financing to separate the MH and the land to allow me to do two separate deals i.e. Sell off the MH and rent the land?
Another option I never considered is Lease option. I will have to study this for a bit.Thanks for the seed for thought.

9

takes money to make money - Posted by brad

Posted by brad on May 08, 2002 at 11:29:52:

i must aggree my interest in doing these deals is only for the quick cash that i need to free myself from a J O B. my intentions are to lonnie out the homes that become to much maintence and rent out the rest. my current income from my job is not that great, but for the security that that steady paycheck brings in it is priceless. i have made more money in a month(last month) than i will bring in in the next year at work, but unless that money is reinvested i may as well pi$$ it away. make your long term to better your life, getting there will take many routes. my short term goal is to double my monthly income with rentals in six months. i do not count the income from sales since it is not consistant. that is just the bonus for me.

10

Cold Weather and Land Deals - Posted by Tony-VA

Posted by Tony-VA on May 08, 2002 at 13:08:19:

George there is several “Good News” responses to your post.

For starters, Scott is correct. I think you are assuming that the cold weather winterization of the mobile will be considerable. This is a harsh assumption. Remember, people live in these homes all year long. These homes are designed that way. The enemies you face are not much different than a single family home really. For example, frozen pipes if the electricity and heat are not on. But if you are renting the home and it is cold, then they are both going to be on (or your tenant is going to call).

Shoot an email to Chuck-NY and he can explain just how he winterizes vacant homes when necessary. I think you will find it far less work than you imagined.

Good news number two.

You have stumbled onto something that many do not completely appreciate. Without having tried this yet, you have given several great exit plans for this type of property. You can sell the home (probably later) and simply rent the land forever. You can lease the land and home. You could lease / option the home (using the price of the home to pay off the debt service to make it possible). Or like traditional real estate, you could simply let it appreciate and sell at retail (or owner finance etc.).

Yes, chances are that initially you will have to get financing that is collateralized by both the home and land, but this is not going to be forever. Chances are you will rent it for sometime and as the loan gets paid off (and you make a profit spread), you will find different values in the various exit strategies.

I like deals that give me more control and more exits. No park managers to hinder your deals, appreciation of the real estate (and the ability to yank the land (rent it) while selling the home… not an easy task with traditional real estate by the way).

Depending on how you buy these land/home deals, many times your outlay of cash will be the same as a routine Lonnie deal.

Best Wishes For Your Success,

Tony-VA

11

Re: Typical Lonnie deals are not my first choice - Posted by ScottS(NC)

Posted by ScottS(NC) on May 08, 2002 at 12:45:29:

George,

I have family in northern WI that have shown me mobiles that are lived in year round. Once they are insulated and winterized they should be good from that point on. They also have mobiles designed to carry the weight of a large amount of snow on the roof, and are insulated with better windows and doors and better R-Values. My point is, winterizing is done at set-up and is a one time thing. As long as you keep the heat on year round this won’t be an issue to renting the home. HTH Take Care ScottS(NC)

12

Re: takes money to make money - Posted by Eva

Posted by Eva on July 08, 2002 at 19:23:10:

Hi, I am so new at this and I have a question. I have a very good job but I am interested in doing my first deal with no cash out of my pocket. What suggestions do you have.

13

Re: takes money to make money - Posted by Lou

Posted by Lou on May 13, 2002 at 21:17:26:

How long have you been working at this? Do you have some pros and cons you’d like to share?

14

Re: Cold Weather and Land Deals - Posted by George

Posted by George on May 08, 2002 at 20:07:32:

You guys are great. Thanks for the information. I really look forward to reading all the posts on this and the RE Financing board. Everyone is so good.
I haven’t dealt with MH in many years. All I remember is having to deal with frozen pipes when any number below 32 was even mentioned. Not a fun time.
I have printed these posts for future reference.
Again, much thanks!

15

Re: takes money to make money - Posted by brad

Posted by brad on May 14, 2002 at 10:46:24:

i have been doing this on and off for around 7 years. the best advise i can give you have gotten before and that is do not fall in love (with the investment) once it becomes personal you (i )make mistakes. remind yourself as your doing repairs that you will not be living there and this keeps me from overdoing it. i do not sell dumps but i dont install the hot tub either. this forum is full of excellent advise. and i would like to give credit were it is due but that list is very long here. the hardest part for me so far has not been money, although that has been hard at times but it has been bringing my thinking away from what i want and what i need. i live in a nice home and my first trip to a park took ten minuites and i left and said i would never live there and could not invest there since it would not satisfy me. after finding this forum i went back and now have 3 options in the same park. remember this is a choice like buying velcro or string shoes. but if you buy the ones with the strings you had better learn to tie them. if not you may trip, in other words educate yourself first. but you do not have to know it all to get started.