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Get benefited form your Rentals with NoBankNoMoneyDown
There are a number of positive things to be gained by converting your rentals into land contracts. A land contract is considered as an installment sale by the IRS. Instead of rent, in an installment sale you receive a land contract (PITI)
payment, which consists of principle, interest, taxes, and insurance. The interest is taxable, and the taxes and insurance are usually a wash because the money is a pass through, leaving the principle portion which is taxable only in proportion
to the difference between the purchase price and the land contract sale price.
Just as an example, you buy a house for $80,000 and sell it on a land contract for $100,000 a 20% gain. Thus, only 20% of the principle paid to you in any given year, including the down payment, is taxable. At the same time, if you have a
mortgage on the property, you have interest expenses which are still deductible.
The nice thing from the resident's standpoint is that they now respect you as the banker and enjoy the mortgage interest deduction and pride of ownership. In addition, their having made a down payment gives them a bigger stake in the property, and helps assure they'll look after your investment.
If they do not have adequate down payment you have the month and a half to take advantage of the 10% tax credit up to $8,000.
For more information on how the tax credit works visit NoBanksNoMoneyDown.com Go get 'em.
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