50/50 Partnership BRRRR on Commercial 6 Plex

50/50 Partnership BRRRR on Commercial 6 Plex

Member since 2021 · 10 posts · 1 vote

So my wife and I partnered with a friend on a 6 plex in Ohio. Bought it off a wholesaler for 220k and both of our names are on the TITLE and we split it 50/50 all cash. We did not form a LLC as we had to buy within 5 days by the time this deal got to us. We have improved curb appeal and successfully raised the rents by 10% as they were way under market. We have an investor interested in buying for 350k, but Im wondering if its possible to BRRRR this commercial property as Partners, and get our capital back so we can keep this cash flowing property in our portfolio and not have to pay capital gains taxes (im also not sure how to 1031 exchange when its a partnership owned property). Im not sure where to start, any thoughts or suggested would be greatly appreciated. Commercial Lender referrals would be greatly appreciated as well. Thank you for your time!

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Evan Scott, A refinance will not save you any taxes if you are planning to sell.  While a refi is not a taxable event, a sale is.  And the tax on the sale is not determined by the amount of equity in the property.  It is the difference between your adjusted cost basis (purchase +improvements-depreciation) and. your net sales price.  So the Brrr tactic wont save you taxes.

    A 1031 on that sale is very easy to accomplish.  Any tax paying entity can do a 1031 exchange And right now there are two tax paying entities for that property - you and your partner.  The way to look at it is that you own a piece of property that happens to be 50% of a larger piecs of property.  So when you sell you can do a 1031 on your 50% and your partner could do a 1031 on their 50% or just take their 50% in cash and pay the tax.

    The 1031 Investor5137 Reviews
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