If more real estate owners (especially long time landlords) knew about ‘the Installment Sale’ tax code 453, there would a lot more seller financing and a lot more notes being created that would add to what I would guess is about a $70 Billion private mortgage market.
It’s very odd from my perspective that attorneys and CPAs know about this tax saving strategy, but will rarely bring it up to their clients.
A 1031 Exchange is well known, and… not everyone wants to trade one headache for another. Often landlords just don’t trust other people to manage their properties for them.
So… the CPA quotes the numbers, and many people just say, “Nope.”
“I’m not going to pay the IRS a third of what I’ve built.”
So the idea of selling goes back in the junk drawer and the handcuffs go back on… maybe next year.
The first commercial building I bought there was a handwritten sign on the back door:
For Sale, Call John
I didn’t have a lot of money, but hey, what the heck? We needed a place as it was hard to get much work done from home with 4 little kids running around.
First thing he says is,
“Now I’ll have you know, young lady, that we won’t take cash for this property. You’re going to have to pay us over time.”
Yes sir!!
They had planned for decades that this commercial building was going to be their primary retirement vehicle by selling via Installment Sale… owner financing.
They paid it off free and clear before they paid off the loan on their own house.
The reason?
Bank CDs were paying about 3.5% at that time… they charged us 7%, and didn’t have to give the IRS much at closing.
And… their retirement was secured by a property they knew intimately… they could go check on it, touch the walls, kick the curb.
If something went wrong, they could take it back and sell it again.
If the stock market crashes, good luck taking control of whatever company you’re invested in to make sure you get your money back out.
I’m always looking at real estate from the perspective of the note business.
How do we get more notes? How do we solve more problems?
Educate more people about seller financing.
That’s why I got my real estate license again after 15 years without one…
I’m already investing in real estate and using owner financing for myself and inner circle, and I want more people to have access to this strategy.
To pair tired landlords with a tax problem with good buyers who want to escape the rent cycle, but can’t qualify for a bank loan (or won’t pay their rates).
Non-bank housing meets non-Wall Street retirement solutions and everyone wins.
And while I’ve done some wholesaling and novations and found meaningful connection with sellers and buyers in that capacity, the reality is that I’m just wired as fiduciary.
Protecting all parties and creating fair exchanges is just in my DNA, so what I found is that while I did make more than I would have as an agent, I took on more risk to do it and faced an irritating amount of garbage from other agents and escrow people that didn’t get and didn’t trust what I was doing.
As an agent, I can help more people in a way that fits my personality, make a bigger difference here in my local market, and educate more sellers about the Installment Sale… being the type of agent I wish I saw more of instead of trying so hard to get through to other agents.
And every now and then, it’s likely that I’ll pick up an owner financed property or a master lease (which often leads to owner financing), or get to buy part of a note at closing or later on down the road.
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