I have an owner who is interested in selling a building to me but wants to identify another property before he signs a contract (to avoid a large tax hit of $100K+). Obviously the easiest route would be to find him a property (which I am in search of), but wondering if anyone has had any luck in pitching some sort of strategic seller financing options or other options that could spread out his gains and/or reduce the tax hit. Any input would be much appreciated!

Originally posted by @Jeff Tyndall :

I have an owner who is interested in selling a building to me but wants to identify another property before he signs a contract (to avoid a large tax hit of $100K+). Obviously the easiest route would be to find him a property (which I am in search of), but wondering if anyone has had any luck in pitching some sort of strategic seller financing options or other options that could spread out his gains and/or reduce the tax hit. Any input would be much appreciated!

 Just do a Lease Option. It satisfies his needs if written up properly.

@Mike M. Thanks! Can you elaborate on, “if written up properly.” ? I have never executed a lease option before. 

Originally posted by @Jeff Tyndall :

@Mike M. Thanks! Can you elaborate on, “if written up properly.” ? I have never executed a lease option before.

 And YOU shouldn't do it. You should have your attorney write it up. Basically you want the option for the length of time it takes him to find a 1031 exchange property it looks like to me. An attorney would word it so that it's acceptable to your state and to the IRS. "Don't try this at home". ;-) Let the attorney take care of the agreement, just tell him what you are trying to accomplish.

@Jeff Tyndall Is your owner looking to actively own the replacement property? Or is he open to a passive investment? If he is interested in a passive investment, he could 1031 the sale proceeds into a DST or NNN TIC sponsored by a real estate syndication. One of the benefits of a DST is providing liquidity and investment options to a reluctant, tax adverse seller.

@Chad Kolinsky interesting. What is the process for something like that? How can I go about researching an option/what should I be looking for? Thanks for the insight!

@Jeff Tyndall Delaware Statutory Trusts (DSTs) are securities that accredited investors can invest in. If your client is accredited (https://www.investopedia.com/terms/a/accreditedinvestor.asp), you can work with a financial advisor or a FINRA register representative like myself to find a suitable investment for your client. If they are not accredited, message me and I will give you the contact information for a colleague of mine that syndicates NNN TIC investments.

You can start researching DST real estate sponsors. I recommend my clients invest with establish companies, with years of experience, and great track records of results. Firms like, Inland Private Capital Corp, Bluerock Value Exchange, Cantor Fitzgerald, Passco, ExchangeRight.

The process is similar to purchasing any replacement property in a 1031 Exchange. You client sells the property, sends the money to a qualified intermediary, and identifies / purchases the DST. When identifying a DST, your client is purchasing a fractional interest in the underlying property. For example, he may purchase 1% ($100K) of 100 Main St DST.

One benefit of discussing DSTs with your client is you don't have to run around trying to find a property for him to identify. Each one of the sponsors I mentioned usually has a few DSTs that they are currently syndicating. 

@Chad Kolinsky thanks so much for your insight here!