Real Estate Junkie · New Orleans, LA · Member since 2008 · 274 posts · 165 votes
Anyone out here thought about doing a lease purchase? It has recently come to my attention that the 8k tax credit works on lease purchase deals as well as straight up purchases.
We were quite surprised so I thought I should share
We have lease purchase properties available, but only in the Tampa area.
Kim
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
17y
I was under the impression that the $8K tax credit was only available to buyers who took title prior to Dec 1...but with a lease/purchase, the buyer/tenant doesn't take title until they execute their option...
Can you explain how you're making this work for lease/purchase tenants? If this is true, I have a couple lease/purchase tenants who would be very happy...
Real Estate Junkie · New Orleans, LA · Member since 2008 · 274 posts · 165 votes
17y
The best answer I can give you is to talk to a CPA or tax preparer, ASAP. We have one who handles it for us so I am not exactly the specialist.
We keep hearing that they are trying to extend the credit past Dec 1, let us all hope that they do!
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
17y
Originally posted by Kimberly Jones:
The best answer I can give you is to talk to a CPA or tax preparer, ASAP. We have one who handles it for us so I am not exactly the specialist.
We keep hearing that they are trying to extend the credit past Dec 1, let us all hope that they do!
My CPA says "no dice" unless they actually purchase the property...and he generally knows what he's talking about when it comes to real estate tax law...
Real Estate Investor · East Aurora, NY · Member since 2009 · 70 posts · 22 votes
17y
Per the IRS - I don't think L/P will qualify
Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?
A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)
Specialist · Las Cruces, NM · Member since 2009 · 557 posts · 71 votes
17y
Originally posted by Paul Beauchemin:
Per the IRS - I don't think L/P will qualify
Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?
A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)
Real Estate Investor · Atlanta/Alpharetta, GA · Member since 2008 · 5 posts · 0 votes
17y
No, a Lease Purchase doesn't qualify. We have done extensive research on this and had our contracts modified by a CPA/Attorney team so they would be a bona fide sale in the eyes of the IRS but still afford the owner the protection of a Lease Option contract. The bottom line is that the only way to do it and comply is to structure the contract as an owner finance/contract for deed. It has to be a sale in the eyes of the IRS to qualify for the tax credit!
To me it seems that all of these rights and responsibilities can be conveyed in the lease/purchase agreement. So to me that says a lease/purchase CAN qualify if structured correctly.
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
16y
Josiah, you might be granting temporary rights that typically belong to owners of real estate, but the key here is whether a sale has been consummated.
In lease option, the buyer has not really purchased the property just agreed to consider purchasing the property.
Residential Real Estate Broker · Merrillville, IN · Member since 2010 · 35 posts · 17 votes
16y
A lease purchase will not work but a land contract will. The land contract does not even have to be recorded. I know this for a fact and have used the tax credit received from the buyers to secure as a down payment on the land contract. They simply sign a promissory note to pay th down payment once they received the check.
Real Estate Investor · St. Petersburg, FL · Member since 2010 · 63 posts · 40 votes
16y
Any CPA in this forum? I have a lease/option contract dated 9/08 and I send the payment directly to the bank, pay the property taxes, pay the hoa fee and had to also pay the sewer upgrade fee. I should be entitled to the tax credit, but it doesn't appear I can. Any thoughts?