MHP Seller financing & 1031 exchange.

Mobile Home Park Investing
7yFollow

MHP Seller financing & 1031 exchange.

Ingrid J.
Investor · Tromsø, Norway (Europe) · Member since 2015 · 431 posts · 194 votes

Hello,

I am looking into seller financing for purchasing a mobile home park, and I have a question I can't find the answer to.

What happens if I buy a mobile home park from a seller through seller financing. Let's say I do a value-add and five years later want to do a 1031 exchange into something bigger. We are assuming I am still paying the seller through the loan he/she gave me.

First of all, what happens to the seller who gave me seller financing? I want to make sure the seller who's been graceful and has taken a chance on me by providing me seller financing doesn't get punished down the line with taxes. 

And secondly is it possible to do a 1031 exchange it if I want to roll into a bigger park, or even an apartment complex? 

Thanks a lot on your input. Highly appreciated.

0Reply
23 views

3 Replies

Jump to latestLatest
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    7y

    @Ingrid J., from your perspective it's nothing any different from any other loan that has to be paid off in order for you to sell.  That also means then that the original seller who carried your loan will be paid in full upon your sale.  So the tax that they had been spreading out over the life of the note would then be due in full because you paid them in full.  That may or may not be an issue for them.  Probably a good discussion point in negotiation.

    Yes you can 1031 exchange from any type or size of investment real estate into any other type or size.  the reinvestment criteria insure that if you want to defer all tax you must purchase at least as much as you sell.

    The 1031 Investor5140 Reviews
    WebsiteView Page
    3Reply
  • Ingrid J.
    OP
    Investor · Tromsø, Norway (Europe) · Member since 2015 · 431 posts · 194 votes
    7y

    @Dave Foster Thanks a lot. That makes sense. Is it common to include a section in the seller financing contract on what happens should we as the new buyers decide to sell within 3, 5 or 10 years?

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    7y

    @Ingrid J.prepayment and early maturity clauses are common to see in contracts.  They should also be terms in the mortgage.  Particularly if the seller is wanting to defer taxes. 

    The 1031 Investor5140 Reviews
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free