When the bank says, no, and you need to purchase a home to lower your taxes

Every year during tax season, I end up telling a tax client to purchase a home by the next tax season in order to avoid paying extremely high taxes. Clients who suddenly earn six figurers incomes and have no write offs, need to create a legal tax shelter. Purchasing a home is one way to resolve this issue.

And almost every year, a tax client calls in August through November, to say, the banks won't finance a home, even with fairly good credit.

With this happening over and over again, it has put me into the real estate research mood. I'm not licensed in real estate, however my research says, owners need to sell, and certain people really do need to purchase.

Solution: Rent to own or lease with option to purchase. True the tax client can't get the tax benefit until they actually purchase the home, but at least it puts them on the right track.

As for sellers, there are many reasons why selling their home with a lease option contract can be good. First they can charge the interest rate that the lender or banks would be getting. This can add up to a large bonus over the years. (Your rates in most cases would be considered hard money, so you are looking at 6% to 10%) The monthly payments can provide can serve as your retirement fund, and you can travel during retirement, instead of counting pennies each month. And you are taxed at a lower rate because your annual income is lower. (And if you really need the cash, you can price your home accordingly, and sell your mortgage note for immediate cash)

Sellers are often worried that if they lease option their home, that the buyers may walk away and not pay the monthly note. GOOD, let them walk away. (Be sure to keep good insurance coverage) You get the house back, AND you get to keep their security deposit of $5000 to $10,000. You just repair the home and do it again. Collect another $5000 security deposit and sign a new lease option contract. (Yes you will have to pay taxes on the security deposit) You can click on the link above to view legal and real rent to own options.

It is a good idea to include an experienced attorney in your contract signing. Regardless if you are the seller or the buyer, you want to be protected. Legal advise may seem expensive, however, not knowing may cost even more.

So this is how, I help tax clients lower their taxes, when the banks continue to say, no.