1031 exchange:
Owner Carry Financing Devalues 1031 Exchange
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In a slow market sellers are often asked to carry back part of their sales price.
The following procedure allows the seller to have his cake and eat it too:
Prior to sale, the seller takes a cash out mortgage on the property equal to the amount of the owner carry.
At closing, instead of carrying back the loan, the seller lends to the buyer the cash from the refinance.
The seller receives the full sales price in cash or as 1031 exchange proceeds in the case of an investment property sale.
The seller now has a tax basis in the note equal to its face value, and will only pay tax on the interest received, not on repayment of principal.
If however, you do not provide this "private financing," but instead finance the owner carryback directly from your proceeds, you will often owe capital gains on the amount of the note.
Call us at 1-888-899-1031 or email us prior to agreeing to carry back financing, we can help!
