Who Gets To Claim The Tax Benefits In A SUB2 Deal?

Who gets to take the mortgage finance charges and property tax when doing a SUB2 deal with a lease and an option to purchase?

Thanks
Housebyr

Comments(4)

joel20th October, 2003

I am going to have to worry about this too, since we have our first subto deal done.
classimg20th October, 2003

We are curious too?!
[addsig]
MrsMeltzer20th October, 2003

Whomever OWNS the property takes the tax deductions.

With a lease option, it is wise to have TWO agreements,
1. Standard Rental Agreement
2. Option to Purchase Agreement.

This protects you, the owner of the property since they people are RENTERS until they actually purchase the property. As you know, RENTERS don't get to take depreciation, mortgage payments, taxes, etc.

If the people in the property don't pay their monthly rent, then it's easy to evict because you can show the standard RENTAL agreement and they can't claim part ownership in the property.

Of course, always check with your lawyer to make sure that all of the Real Estate laws in your state are being followed, as they differ from state to state.

Hope This Helps,
Mrs. Meltzer
dbuddha21st October, 2003

I thought this was a Sub2 question? On a normal lease, the tenant would not get any tax advantage. But I thought on a buyer of a Sub2 (someone who bought from the investor) would ahve the tax advantage because he/she is paying an interest on it.

Say you bought a property sub2 loan for 6% interest. you then turn around and sell it to a T/B for 7% (packing the payments), assuming the purchase price stays the same. Wouldn't that 7% be tax deductible?

Please advise!