Real Estate Agent · Bloomington, IN · Member since 2016 · 62 posts · 19 votes
I've come across Jack Miller's books about exchanging equities etc for cash flow. A lot of his books involve Sandwich Lease Optioning properties for cash flow. Some of the more advanced strategies include a 3-party exchange to get the deal done. Example: seller is willing to sell on Lease option to me, but wants cash for their equity (which could be like $50-100,000). Instead of having that money sitting around and trading it (or borrowing it from anyone), his strategy is to find something else to trade that is worth a similar amount. Buyer finds an owner of buildable land worth $50k. The land owner deeds the land to the house seller, the seller sells to me via lease option (or sub-to), and i owe the land owner a note at a negotiated low rate. The home seller takes that land free and clear, and can sell it for cash if they like, i pay off their mortgage plus the note for the land, and i rent out the house.
I've come across Jack Miller's books about exchanging equities etc for cash flow. A lot of his books involve Sandwich Lease Optioning properties for cash flow. Some of the more advanced strategies include a 3-party exchange to get the deal done. Example: seller is willing to sell on Lease option to me, but wants cash for their equity (which could be like $50-100,000). Instead of having that money sitting around and trading it (or borrowing it from anyone), his strategy is to find something else to trade that is worth a similar amount. Buyer finds an owner of buildable land worth $50k. The land owner deeds the land to the house seller, the seller sells to me via lease option (or sub-to), and i owe the land owner a note at a negotiated low rate. The home seller takes that land free and clear, and can sell it for cash if they like, i pay off their mortgage plus the note for the land, and i rent out the house.
is anyone doing anything remotely close to this?
I’m late in answering this but what the heck
There are two national groups that focus on EXCHANGING real estate for purposes OTHER than 1031 tax deferral
Society of Exchange Counselors
Council of Real Estate Exchangors
While “exchanging” or “trading equities” got its start in 1961, it reached its pinnacle in the late 1970s and early 1980s when two ingredients were present which made exchanging much more viable. First, super high interest rates in mid to high teens made most real estate transactions unprofitable if new financing was needed. Secondly, almost all mortgage loans written prior to 1979 were assumable without qualification. In fact one didn’t have to assume the loan at all, one could they were interested take ownership of property subject to the existing loan and no violation of any loan covenants occurred.
Low interest rates, the availability of financing for most projects and due on sale provisions of mortgage loans mean for most transactions cash sales, third party financing sales, and seller carry back sales are easier, quicker, simpler and better situated than exchanges. While there are creative circumstances where exchanging is a better route, it is a very small part of the transaction world. Should interest rates skyrocket and financing availability vanish, we would probably see a renewed interest in exchanging.
@Sam Epperson, Almost never in modern days. The calculations are tough to manage. The opportunities for incidental tax bills almost certain. That seller would have a tax bill on their full gain in the scenario you described.
Back in the day when West Texas dirt was cheap, it was used to equalize things many times. But today it's almost impossible to work.
@Sam Epperson, Almost never in modern days. The calculations are tough to manage. The opportunities for incidental tax bills almost certain. That seller would have a tax bill on their full gain in the scenario you described.
Back in the day, when West Texas dirt was cheap, it was used to equalize things many times. But today it's almost impossible to work.