Do You Want To Continue Making Money With Your Apartment Building?
We Can Help You: Eliminate Tenant Issues, End Maintenance Responsibility, and Defer Capital Gains Tax… All While Paying You Every Month
Quite often, we work with people who simply want to end the headaches of being a landlord. They have high equity in the property, it might even be fully paid off. However, they don’t sell because they aren’t ready to pay Capital Gains Taxes. Depending on your income level, the amount you will have to pay can end up being thousands! And that doesn’t include any applicable state taxes!
By deferring your tax payment to a time when your income is lower, you will in-turn lower the rate of taxes you’ll be required to pay!
Create A Monthly Income Stream & Get Market Value By Carrying Back A Note
By carrying the note for the buyer, you are, in essence, acting as the bank. You will receive a downpayment and monthly mortgage payments each month. You will still retain a monthly income, but you will no longer need to be responsible for tenant screening, cleaning, maintenance or anything else that goes along with being a landlord. Unforeseen repairs and expenses become our responsibility, not yours.
Only when you have been paid in full is the sale considered “final.” It is at this time the capital gains taxes are assessed.
There are additional benefits, including:
- Earning interest on the note which is typically anywhere from 5-8%
- You will receive a monthly income stream, helping to create financial security
- You will have peace of mind knowing the property has sold. If we default on the loan, you can foreclose and retain the property for yourself… keeping any monies we have paid towards it.
- You will end the hassles and headaches of maintenance, repairs and tenant issues.
Capital Gains: A Direct Sale vs. Carrying a Note
Selling outright to a cash or bank financed buyer: Have you owned the property for over 12 months? If so, immediately after the sale, you will need to pay out Capital Gains taxes for all profits received in the tax year of the sale. Often times a big sale like this will bump you up into a higher tax bracket, due to the windfall of profits you receive.
Carrying Back A Note To The Seller: When you carry a note, you will receive payments each month, including interest on the loan. You would be taxed the normal income tax rate for the interest income, but would only pay the capital gains tax as you receive payments from the buyer each year. Effectively deferring your capital gains tax payments. Many people choose to defer a capital gain tax payment because they foresee having a lower income once they retire. A lower income will put them in a lower tax bracket, effectively lowing what is paid in the long run.
Which Tax Strategy Will Help You Meet Your Goals?
Ultimately, if you’ll need the cash from the sale right away, carrying a note will not be your best option.
However, if you don’t need the cash up front, and you are interested in earning at least a 5-8% return on the money, carrying back a note on the sale (for all or part of the sale) may make a lot of sense for you!
Let’s sit down and discuss your property and your financial goals! We want to help create a win-win situation for all parties! Give us a call now to learn more! (914) 469-7388