I made a pitch for 14 rental properties (13 SFH and 1 ea. 3/4 acre lot in town). We have tentative agreed on a price that started at $1.12M the Seller asked for initially and my pitch of $915K . The Seller countered with $1,065 with me getting the damage deposits and advanced rents (that he is not sure he has these from all the tenants) . We have a few more issues to work out. I told him I had to keep my offer and asked if he could agree to sell at the $915 if I could pay all cash within 7 days-10 days. He first response was, after a 2 minute or so pause, was if he got paid cash he'd "have to to something with that money or have Uncle Sam take a big bite of it. Aside from his wife he has a son (50+ish) and some grandchildren all of which have already been taken care of. I asked how he had expected the payment to be made and he confessed he had no thought about it. He had mentioned in the past he had owner financed but I think it was more of rent to own. I brought up a lease purchase (all the properties are in excellent condition and owned free and clear with no encumbrances or liens). In both scenarios he is concerned of the govt getting a chunk or his outliving a owner finance. I mentioned the owner finance would be something passed to his heirs (I am way out of my league here). He said he needs to discuss this with his accountant. So I wait for that meeting. My question, what you heavy hitters do when the owner is worried about loss to the government but is up in age? I'd like to have some recommendations he could discuss with his accountant. Thanks
@Doug Haisten the seller is stuck between wanting his cash to have freedom and also not giving a chunk to uncle Sam, that part is obvious. What I believe you need to do is find out how much money he needs to live on, in the way he wants to retire, and work that into your payment plan. How you structure that plan is up to the two of you. The main point will be to get him as much money as he needs on a month to month/yearly basis, without the gov't taking a big chunk. This could be in the form of a "lease option" where your "master lease" payments go directly toward the end purchase price of the property at a certain trigger point.
You could lease the properties out as you fit and but the property at a later point. The seller gets to let go of all of the day to day headaches of the property, he also gets a higher monthly check from a single person, and when the property does eventually transfer you he has a lower tax bill.
Good luck to you!
Pay him in $100,000 increments over 9 years and lower the tax bracket? Just making a guess.
The seller is not really needing this for retirement as he is well set he just hates to see the govt get a big chunk and he wants a fair deal. I did mention a lease purchase and him getting away from the repairs/ maintenance, property taxes, collections etc. I’d like to do the lease option with me as the buyer and I could lease option out to tenants or other investors. Is that possible?
@Doug Haisten , yes that is actually what I am suggesting. You lease option the properties from the seller and then "sub" lease it to your tenants. In essence you become the master lease holder.