Real Estate

Example

Clark purchased a home for $150,000 in 2000. After years of renovating, he decided it was time to sell. He was able to sell the house for $750,000 yielding him a $600,000 capital gain. The capital gain would be taxed at 25% (147,392) leaving Clark with $602,608 from the sale of his home as a lump sum. Alternatively, Clark decided to take the proceeds of the sale from his home to put into a Structured Installment Sale. He wanted to customize his payments so that he’d receive $21,426 per month over a 3 year period. The tax on the Structured Installment Sale payment over the course of 3 years would total $96,066 meaning Clark would save $51,326 in tax and a 8.8% savings including interest.

Benefits In Real Estate

Higher Sales Price

Sellers can often command a higher purchase price for their property by offering financing to the buyer. Buyers may be willing to pay a premium for the convenience and flexibility of installment payments.

Continuous Income for Sellers

Sellers receive a consistent stream of income over the term of the installment sale, providing a steady source of passive income. This can be especially appealing to sellers looking to supplement their retirement income.

Flexibility in Terms

Structured installment sales allow sellers and buyers to negotiate flexible terms, such as the interest rate, down payment, repayment schedule, and other conditions. This flexibility can be tailored to meet the specific needs and preferences of both parties.

Reduced Closing Costs

Structured installment sales may have lower closing costs compared to traditional real estate transactions that involve lenders and mortgage brokers. This can result in cost savings for both parties.

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.

Control Over the Property

Sellers often retain legal title to the property until the buyer completes the installment payments. This gives sellers a level of control and security, as they can take back ownership if the buyer defaults on payments.

Contact Us

Office

+1 800 364 6488

SIS@branthickey.com

Direct to Aaron Hickey (Advisor):

+1 724 799 0026

@Choosetransactions 2023