If I was to land contract my house to someone.. when I set the interest rate with them; do I have to claim that on my taxes?
Or could I offer a rent to own, with so much going towards the princable, without the hassel of interest?
How exactly does "rent to own" work?
2006-09-09 17:08:10 · 9 answers · asked by rulkiewicz 2 in Business & Finance ➔ Renting & Real Estate
no
2006-09-09 17:14:02 · answer #1 · answered by Anonymous · 0⤊ 0⤋
There's no interest involved.... Here's an example
1. You give the person the option to buy the home for a set price within a set time period, 1-2 years usually (say you set the sales price at 100k)
2. You set a rent payment per month
3. You set an amount of this monthly payment that will be used as credit toward the down payment of the home (meaning you charge $1000 monthly, $300 will be used as a purchased credit accrued with each payment should the option to purchase be exercised) So after 1 year the renter has accrued $3600 toward the purchase of the home. After 2 yrs this is 7200. This basically is over 7% down which will help the renter when it's time to get a loan.
4. You will pay taxes only on profit from this investment property yearly, that means that you subtract you property expenses from the total rents received. Expenses including mortage interest, taxes, insurance, maintenance, and the good one, depreciation, to name a few. This is net profit or loss is added or subtract from your ordinary income.
5. If the purchase option is exercised and you sell the home, that's a tricky question. The tax consequence depends on if you lived in the property as a primary residence for 2 of the last 5 years. if so, up to 250k of the net profit of sale for individual and 500k for joint, is excluded from being taxed. If not, there are other things that will dictate how that profit is taxed, such as your tax bracket, length of time you've owned the property, etc...
hope this helps,,,
2006-09-09 20:57:34 · answer #2 · answered by Kaz 2 · 0⤊ 0⤋
The house and all the responsibilities of it are yours until papers are signed turning over the house to the renters. I believe that you charge an amount in excess of the regular rent and put that amount aside to be used as the renter's eventual down payment on your house. Don't believe you could charge interest on something that they have not actually bought yet.
2006-09-09 17:16:17 · answer #3 · answered by Anonymous · 0⤊ 0⤋
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2016-11-07 00:31:49 · answer #4 · answered by Anonymous · 0⤊ 0⤋
If you rent your house out, of course you have to pay taxes on the income. Basically, you are offering the renter and option to buy, and you must pay taxes on the "premium" you are collecting for that option, as well as any rent that is paid.
2006-09-09 17:13:38 · answer #5 · answered by Califrich 6 · 0⤊ 0⤋
All the rent that they give you go towards the sale of the house until it's sold your held responsible for taxes everything
2006-09-09 17:16:54 · answer #6 · answered by sugarbdp1 6 · 0⤊ 0⤋
yeah i saw this option and that would be great. i hate wasting money on rent..
sorry i couldn't answer your question.
2006-09-09 17:14:30 · answer #7 · answered by t c 3 · 0⤊ 0⤋
get a good real estate attorney for this!
2006-09-09 17:17:23 · answer #8 · answered by dt 5 · 0⤊ 0⤋
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2006-09-09 17:13:25 · answer #9 · answered by . 1 · 0⤊ 1⤋