The solution: Seller-financing closes the deal
Seller-carryback financing has continued to be used for all types of real estate, including mobile homes on lots or land; small or large apartment buildings, office buildings, commercial, industrial, motels, warehouse properties; special purpose properties such as theaters, hospitals, senior care facilities; and raw land, farms, or ranches.
My favorite uncle--Uncle Sam
Many sellers mistakenly think they need to pull all of the equity out of the sale of their property. Uncle Sam doesn't seem to think that�s such a good idea, especially for real estate investors. Otherwise, he wouldn't pound us so hard with those tax hits when we sell for cash out or reward us for structuring our real estate sales in certain other ways.
The U.S. Tax Code provides several strong incentives that make it exceptionally profitable for real estate investors to �both a lender and a borrower be!� The most recognized may be the Section 1031 tax-deferred exchange, which is the bailiwick of perhaps the most educated and creative people in real estate--professional Exchangors.
Section 453 (Installment Sales) allows investors to avoid the bulk of capital gains taxes ordinarily due on the sale their investment property. Using the seller-carryback installment payment technique, sellers can avoid what we call �tax friction� and defer these taxes, paying them in very small increments over a long period of time. As a result, sellers are able to reinvest their profits for even more profits.
The icing on the cake
Seller financing, if structured properly, creates an opportunity to maximize the sale value of the property. And the carryback note gives investors a well-secured, high-yielding, near-cash asset that offers greater flexibility in building up their investment portfolios.
These notes allow us to add strength to our financial statements while earning much better returns than cash accounts, making them valuable tools for further acquisitions and pyramiding the growth of a tax-sheltered wealth accumulation base.
Depending on their objectives, sellers have multiple options other than cash to achieve maximum advantage for profit structuring while cinching the sale of their property and building an healthy investment portfolio.
About the author...
In addition to being a long-time moderator for Creative Real Estate Online�s Cash Flow Forum, David is also a popular contributor to several other private cash flow industry web sites and newsletters and is recognized as a leading author of several prominent intermediate and advanced training courses for the private cash flow industry.
David is a highly respected speaker and instructor, making regular appearances at conventions and workshops for NoteWorthy, Creative Real Estate Online, and American Cash Flow Association, among others.