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buy vs rent
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jakescia
Posted 11/26/2012 10:15 (#2717917 - in reply to #2717878)
Subject: RE: buy vs rent Sounds like her tax person is not imaginative



Oskaloosa, Iowa 52577

Buy it from her on the installment basis.

Have the title held in escrow.

That locks in the land for your purposes, gives her essentially the same/similar cashflow as the rent......and guards against any hickies in the title when she passes, if the title is transferred but held in escrow.

I would guess that her problem is she is afraid of handling the money if received all in a lump sum..........whereas a steady cashflow such as rent would solve that problem........and cut her taxes.

Her security position would be similar to if she retained the land and rented it......ie she would retain the land to the extent of unpaid principal balance.

Make sure you have included in the contract that she cannot put any liens in front of the contract, and that you have the right to make payments on any liens that might arise, just as if you were making them to her as payments against the mortgage.

You need to confer with an imaginative CPA.

This is a matter of solving her problem for her, and simultaneously locking down the land.

For example...........at least get an option to purchase while she is in the mood of transfering ownership.

Lastly....if she is elderly, or not experienced in numbers.........she might be concerned about keeping track of the contract payments.   In order to prevent confusion, in any payments we make against an open account if not paying off the account balance, or if making payments that are the same and recurring, such as rent or payments against contracts (such as for land purchases).........we make the payments unique, so that such are easy to track, as compared to others.

Example........... monthly rent payments of 1000.    The payment in Jan that we actually pay would be 1001.........payment for Feb would be 1002...........for March would be 1003............etc etc.........until the payment for December, when that payment is reduced to allow for the overpayments made during the prior months.

Example.......... periodic payments against open account.........say the balance is 10,000..........and the intent is to pay off over 6 months.   Make the first payment, if made on Jan 15...........1015.  If decide to make more in the next month.......and pay on the 7th of Feb........3007.

This allows both the payor and payee to be able to talk about which payments each believes was made, and therefore isolate the one that ......usually....... the payee does not think was received.

We bot a farm years ago on contract, and the elderly gent who sold it moved out of state, but wanted monthly payments deposited to his local bank..........such were his retirement plan.   We would often make payments ahead or behind of the due date........and that caused him concern, because he could not easily match up the payments made against his amortization schedule, and factor his age plus a little confusion caused by his age.   We switched to the method of making the last digit of the check equal to the month the payment was for..........solved the problem.  Say the required payment was 1071.25 per month.  We would pay him 1081 for Jan, 1082 for Feb, etc etc..........and then reduce the Dec payment.



Edited by jakescia 11/26/2012 10:30
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