Updated about 6 years ago on . Most recent reply
Some input on portfolio land contract deal with family pLeAsE!
My parents are at the point in life where they are looking to sell off their real estate portfolio. They would like to sell it to me but there are a number of items i'd like some clarification on if anyone could help.
Portfolio Overview 16 units over 4 buildings. They are selling it to me for what they purchased them for decades ago. 500K total on a land contract with 0% interest, no money down required. They said they would like to have a steady stream of income for the next 20-30 years without any of the management headaches.
Issues- 2 of the properties still have mortgages on them @ 40K each the other 2 are free and clear.
Depreciation- When does depreciation recapture happen? after the buildings are completely paid off or when the land contract is signed? I would like to find a way around sticking them with a large tax bill as they have depreciated some of these for 25+ years allready.
Heirship- i have 2 sisters as well, if my parents were to pass, these would be apart of the estate. would my land contract then transfer to the heirship (which is what i am apart of) and just pay them/myself? Is there any depreciation recapture required by an estate if there is a transfer upon death?
Depreciation- Can I start depreciating these once the land contract is signed using a basis of the purchase price?
I will be getting a lawyer to assist in setting this up, but figured i'd reach out here to get some input. It is a good deal and may push me over the edge into full time RE investing, i just need to make sure it is executed correctly.
Most Popular Reply
To avoid any tax consequences as well as having to pay off the mortgages, you can simply Masterlease the units from your parents. You are now their tenant and you sublease to all the other tenants. Years from now, when your parents are gone, you inherit the property with a step up in tax basis . They get the cash flow they want without having to manage and without paying recapture or capital gains taxes.