Creative Financing for a paid off Probate
I received a call today from the executor of a will of a landlord I was friendly with. He put I had first dibs to buy his buildings and we're meeting next week. The buildings are 100% paid off and have been kept up really nice over the years, the problem is the area isn't the best and is on the slow upturn from the bottom of the market. I have experience with a couple rentals there so I know I can get them for a solid price.
The issue I'm currently running into is my capital is maxed out on 3 other deals I'm about to start rehabbing/BRRRRing. I don't want to let this one slip by if the price is right. I want to propose an owner financing situation but I also want to show the savings they'd get from it over say a 5 year period. In probate, if a property is sold what does the trust have to pay? Is there depreciation recapture? Capital Gains tax? I want to be able to lay it out that if we did owner financing on a 5 year balloon that we could save them $XXXXX in taxes by spreading it out and not having the beneficiaries tax rate go up the year they sell, thus creating less money in their pocket. Any help would be great. Lets assume the price is $300k for all 3 buildings if someone wants to help me out with numbers.