Just curious if some of the more savvy investors in here have ever written a contract based on the above principal. The buyers were looking to keep taxes down by buying my sellers 11 Unit for 640k but only a percentage of the building would have been "real property" and the rest would be considered personal property. Also they wanted to buy their LLC as well.
Is this something a person can do on smaller investment properties as well?
Interesting. What do you mean above principle ? Above the amount owed on the mortgage ? If so , what you offer isn’t affected by what the seller owes. Let me know if I can help more here.
Yes. The main reason is probably that they want the property tax assessor to see the property value as $481K not $641K. However, this only works if the buyer has a lot of cash. Banks won't want to lend against the personal property in the mortgage.
That was the goal yes. Curious how that would work? Does the title company simply report the sales price at closing of 481k basically? And the county is non the wiser?
Heres a copy of the contract for others to get a better idea what this might look like.
@Ken Quella , were buyer looking to do cost segregation?
The allocation is important to the buyer because amounts allocated to depreciable property and wants to increase the value allocated to the personal property because it can be deducted over the life of the acquired assets.
However, the seller generally should try to minimize the amount allocated to the depreciable property to reduce depreciation recapture and increase capital gain.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing