I live in Texas.

I am putting in a small subdivision of 24 lots. I plan on building 24 houses. I also plan on financing these homes at a local bank. For simplicity, lets say I have $30k in each home along with the lot and development cost, and I sell these homes for $50k. I require a $5k down payment and I finance them for $45k at 15yrs at 10% at $483.57 per month. Therefore I would have a note at the bank for $25k at 6% for 15yrs at $210.96 per month. I net the difference of $272.61 in positive cashflow per house per month for 15 years. What are the tax implications? A local accountant suggested that I have to pay taxes on $20k per house up front ($50k-$30k) even though I have not received the money yet. If this is the case it would not benefit me at all to owner finance these homes. How should I structure it so that I pay taxes as I receive the monies.

Thanks,

Ray C

Hello Ray:

You just need a better accountant... I think he's all wet.

excon