Installment Sales - Pay full price to seller and get your terms.

[Brian Gibbons]

Say you want to focus on the following:

Out of all the houses in the United States, many are free and clear of any mortgages. See this article at DSNews http://dsnews.com/news/market-studies/01-10-2013/a...

So let's say your marketing includes free and clear houses. Most people have free and clear houses are in their 60s 70s etc. Most in this age group think about retirement and outliving their retirement savings.

So when I like to do in my marketing is to talk about installment sales or getting payments for your equity instead of a lump sum.

The IRS allows homeowners to sell their house on installment sale, which means taking payments for your equity.   

See 

http://www.irs.gov/taxtopics/tc705.html

http://www.irs.gov/taxtopics/tc701.html

Let's see how a $100K house, and the cost to sell with an agent (ie commissions, closing costs, sellers concessions, holding costs, spruce up costs) include 10 to 12% of the appraised value.

So maybe the net figure to the seller might be from hundred thousand dollars house 90K - 88K.

So I like to bring up in conversation retirement planning, and use what if statements, like 

"what if Mr. Mrs. seller, I can get you hundred cents on the dollar for your house, so that you would net more money, and turn this residence into an investment property?"

"What if Mr. Mrs. seller, I get your cash flow much like an annuity from insurance company, where you get a cash flow payment for a period of time, and the cash flow would come in every month the matter what.

And if you plan it correctly, this cash flow will continue even after your death, which would be a benefit to whoever you chose, whether it be a church, or your children, or any good cause?"

Info on Annuities

http://www.investopedia.com/articles/retirement/05...

In retirement planning, the three risks to life are covered with, 

- life insurance in case you die too soon, 

- disability income insurance in case you can't work and create income, and 

- annuities in case you outlive your income.

In estate planning, many people are worried that if they give their children too much money and they will squander it quickly. So giving the children a cash flow for long period of time makes more sense.

Now there is a rule called "imputed interest" from the IRS, see http://thelawdictionary.org/article/what-are-irs-i...

Comparing installment sales with reverse mortgages is an interesting exercise.  See http://portal.hud.gov/hudportal/HUD?src=/program_o...

Focusing on free and clear houses in your marketing, and offering installment sales to maximize their home value, getting a cash flow for long period time, and leaving the cash flow to their heirs or their charities I feel is a great way to acquire properties without banks, and holding the property for your own retirement for a long-term rental say for 15 to 20 years, and then you having a free and clear house for yourself, without using banks or large down payments. Also with free and clear houses, there is no due on sale clause issues as opposed to wraps and sub2.

So consider finding free and clear houses, buying them with low down payments, offering good cash flow to the home seller, and planning to hold them for long-term rentals, to ultimately be free and clear of mortgages, so that in 15 to 20 years you have a portfolio of free and clear rentals.  And avoiding banks, credit and maximums on conventional and government loan restrictions!

@Steven Hamilton II and @Bill Walston are awesome tax men here.  

I'd love to hear any comments regarding installment sale purchases.