Taxes And Lease Options
Hi,
I am relatively new to lease options. I have been purchasing homes at foreclosure auctions and flipping them. I have recently began setting up lease option contracts on these homes. How do you account for the option consideration and monthly credits on your tax return? I am assuming they are treated as deposits and not income. If that is true what happens when you sell the property?
Thanks for your help.
Every detailed work-up I do on a property show a gain, the problem is that with the value of the building being so high (inflated?), the monthly cashflow is tiny or negative. So overall your total gain is really lopsided towards market appreciation. A dangerous proposition to operate many buildings in this fashion, correct?
The only option I can see to correct some of this would be an interest only loan, you lose the principal paydown, but you dont dig into your pocket every month either.
I would collect one rent from t/b. This would be a total for the whole property. Let him collect from the tenants, and you collect one amount from him. The rest should be same as always.
Scott
I would not want my T/B to have a Lease with another Tenant. So, I would collect one rent payment (giving my T/B an Option for the whole property), rent out the other side myself, and assign the other Lease (if applicable at that time) to the T/B upon closing. Many lenders will consider a duplex a single family residence if the borrower lives in one side--and the extra income from the rented side can make qualifying easier. This works only with a duplex--nothing larger.
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That is correct.
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whoa. way better idea than I had. He is the King after all.
Thanks Guys!
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