Land

Example

Rebecca inherited a plot of land when her father passed away in 1999. At the time of inheritance, the land was worth $100,000. She kept the land until 2015 when she decided to sell and was able to do so for $800,000 yielding a $700,000 capital gain. There would be a 26% tax on the gain ($180,542) leaving her with a total of $619,458 from the sale as a lump sum. Alternatively, she decided to take the $800,000 to put into a Structured Installment Sale. This would give her $168,660 annually over 5 years. Rebecca would be taxed a total of $153,335 over the course of 5 years on her annual payments meaning Rebecca would be saving $27,207 in tax and a 9% savings including interest with a Structured Installment Sale.

Benefits In Land

Negotiable Collateral and Guarantees

Sellers can negotiate collateral or guarantees to secure the installment agreement. This can provide additional protection for the seller if the buyer defaults on payments.

Customized Land Use

Buyers may have the opportunity to negotiate specific land-use terms or development rights as part of the installment sale agreement, allowing them to tailor the land's use to their needs.

Faster Closing Process

Structured installment sales may have a quicker closing process compared to traditional real estate financing, as they often involve fewer parties and less complex underwriting.

Tax Benefits for Sellers

Sellers may enjoy certain tax advantages when structuring the sale as an installment sale. This can include spreading the capital gains tax liability over several years, potentially reducing the overall tax burden in the year of sale.

Long-Term Relationship Building

Land transactions involving seller financing often result in ongoing relationships between the buyer and seller. This can lead to future land transactions, referrals, or collaborations.

Opportunity for Buyers to Build Equity

Buyers can start building equity in the land from day one, even if they couldn't secure a traditional mortgage. This can be especially advantageous for buyers who plan to build or develop the land over time.

Contact Us

Office

+1 800 364 6488

SIS@branthickey.com

Direct to Aaron Hickey (Advisor):

+1 724 799 0026