Replies to This Discussion

Permalink Reply by Florida Ginnie on March 25, 2010 at 3:51

thanks.

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Permalink Reply by P.G. on March 25, 2010 at 16:16

I wouldn't consult a Real Estate agent. They are not attorneys.

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Permalink Reply by HMI on March 25, 2010 at 17:05

Hi Ginnie,

I'm just picking up on this conversation. If your property is in Sec.3, T18N, R12W we're neighbors. I'm in section 11 of the same which is immediately diagonal to the south and east -adjoining at the corner. Several things come to mind.

First, there was just a well completed two sections straight south of you in Sec 15 by CHK. The well serial number is 239947. Right now it's choked back really tight to a production rate of right at 6.5 million cubic feet per day at a 12/64 choke. A good well. Not a giant like some but good.

I'm also familiar with who leased in your section (large tracts) and what's going on with them. Would be happy to talk with you privately on that.

I also immediately thought about you doing a lease purchase with a buyout at a specified date. There are a couple things you need to consider in the mix. I'm not an attorney but I am a Financial Planner.

One of the biggest considerations should be the tax treatment of a sales/lease transaction. If you do a lease/purchase the lease revenue would likely be classified as "rents" to you and classified as passive income and taxed at your marginal tax rate which is likely much higher than the capital gains rate of 15% if you were to sell it. Here is some commentary on that: http://www.bankrate.com/brm/itax/news/taxguide/review-rates1.asp

So let's say you wanted to put as much money in your pocket initially as you could while still retaining your minerals until a future date using the lease option platform. Myself, I'd be looking for very large monthly payments or quarterly payments etc to produce that cash that I am looking to reel in with a relatively small buyout similar to those used for equipment leases. You can see the trouble with that though if those large chunks are treated as "rent" and taxed heavily. It could be advantageous for your buyer / lessee though since the rents are a business expense and should be 100% tax deductible against income if they are running it as a legitimate business. The problem in that scenario though is that with a minimal buyout their cost basis in the property begins very, very low. Let's say you had a $1.00 buyout on the contract at a future date beyond the date your minerals roll over to you. That $1.00 would likely become the new owners cost basis. If they sell the property later for $100,000.00 they'd have a gain of $99,999.00. This even if they had paid you $99,999.00 in rents over the previous length of the contract.

(That's what I'm thinking anyway -ask your CPA.) At the same time you should talk to your CPA about the treatment of Passive income vs. Earned income and how rents fit into that if they're received as an individual and if they're received as a corporation of which you participate in the management.

Another thing to consider in the above scenario is this: Your buyer/ lessee needs to be operating from a fairly stout cash position because it's unlikely that a bank would lend the money to pay substantial rents on a property that they're unable to put a mortgage lien against. It's not impossible. A buyer/ lessee may have a substantial line of credit that they can use or like I said cash on hand to pay the rents.

I know the mineral retention is a priority for you. But the other concerns should be given attention as well. If you'd like to talk further I'd be happy to. Just "friend" me on here and send me a message.

Are you here or in FL? Do you have a CPA? Hope this has helped in some way.

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Permalink Reply by P.G. on March 26, 2010 at 4:16

How about a Bond for Deed?

http://www.meocpa.com/bonddeed.html

or

http://www.escroserv.com/bondfor.htm

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Permalink Reply by Florida Ginnie on March 26, 2010 at 6:16

Tried that however attorney said diffcult to gain property back and costly if they default for I am holding a note. Thanks

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Permalink Reply by Florida Ginnie on March 26, 2010 at 4:57

Thanks here is my phone number 352-267-0609 and my e-mail artistic216@earthlink.net

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Permalink Reply by Florida Ginnie on March 26, 2010 at 6:23

I agree. Hey P.G. what does your picture contain on this site? Taking an Oath? To what?

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Permalink Reply by P.G. on March 26, 2010 at 7:27

What part of Florida are you located?
I believe I had that area code when I lived just north of Inverness

That avitar was assigned by the forum..

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Permalink Reply by Florida Ginnie on March 27, 2010 at 12:53

Central. Got your message cannot chat till I finish the deal am very determined to get it done legal, and protected one way or the other. Plus I will keep the minerals! :)No matter who currently has it and I did get the copies from the court house.

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Permalink Reply by Florida Ginnie on March 30, 2010 at 10:18

wow, your very observant.

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Permalink Reply by Bacon on March 27, 2010 at 4:01

Please keep us posted on how this turns out.

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Permalink Reply by Florida Ginnie on March 27, 2010 at 12:50

Sure will.

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