L/O:owner depreciated property - Posted by gwtx

Posted by Dave T on May 06, 1999 at 23:14:32:

You mention that the owner is retiring soon and may be interested in a 1031 exchange. In general, a 1031 exchange allows the seller to defer paying capital gains taxes on the sale of investment property when replaced with like kind property.

Since the seller’s chief objective seems to be deferral of income tax, a 1031 exchange may do nothing to provide additional cash flow for his retirement. Similar reasoning would also make a L/O offer less appealing. A L/O provides short term cash flow, and does not defer capital gains when the option is exercised.

Find out what the seller’s intent really is. Perhaps, the seller wants to minimize his capital gains tax bite and at the same time provide a long term income stream. If this is so, the seller can have all this without landlord headaches if you offer to buy with owner financing. An installment sale provides a steady income stream, spreads out the capital gains tax bite across several years, and eliminates the landlord headache.

L/O:owner depreciated property - Posted by gwtx

Posted by gwtx on May 06, 1999 at 21:36:01:

Last week I sent out 30 postcards to out-of-state owners. I received a phone call from an owner that has 2 properties.

He has owned properties since mid-80’s. Tax appraisal is mid-$60’s. Recent comps is mid to high $70’s. Property is in average condition.

He is retiring soon, and has only 1 more year to depreciate properties for tax purposes. He mentioned that he might be interested in a 1031 exchange (of which I know nothing about!).

Should my 3 offers to him be as normal:1)a low-ball offer & then flip to someone to do 1031 exchange, 2)pay 1/2 down & owner finance the other 1/2, 3)offer a L/O deal?

Suggestions? Thanks for the input!

Update!Update!Update! - Posted by gwtx

Posted by gwtx on May 07, 1999 at 10:50:24:

Just got of the phone w/owner. He isn’t desperate by no means. But, he did appreciate the research I had done (for free on my time of course).

I gave him the 3 offers based on just a drive-by appraisal. They are rentals and based on outside condition I would guess they both need $5000 to clean-up and update.

Well guess what? He thought the owner finance, or, L/O sounded very interesting. Says he has to check w/ his partners and CPA. He will let me know by end of next week.

Hey, I’m excited! Even if he might just be a tire kicker. It was my first mailing and I got what I thought was a pretty good prospect.

Now to get 30 more cards out today!