Need help with strategy buying from older Sellers

[Adam Harward]

I'm looking into purchasing a couple of multi-family properties from some older Sellers.  They are getting older and are having a hard time maintaining the properties.  My question is:

-   Their concern is selling the properties with such a low basis would expose them to large capital gains taxes.

Thought I would throw out a post to see what you guys think.  Looking for a win/win for both myself and the Sellers.  Thought about Seller financing etc.

Any ideas on how to structure the deal would be much appreciated.  It would be best if they retained income from the property but didn't expose them to large capital gains tax while at the same time relieving them of the maintenance/landlord issues.

Thanks in advance,

--Adam

[Frank Chin]

I attended the NYU real estate school and one of instructors there specialize in this.

What he does is he utilizes a Tripe net lease. In essence he leases the entire building, collects the rents, handles the repairs, pays all the utilities and taxes. The landlord doesn't have to do anything. The NNN lease holder would then make a monthly lease payment to the owner.

1. NNN lease of over 30 years (goes up to 99 years) is treated as real estate. You can sell it, get a mortgage on it.

2. In a NNN lease, you control the property, the owner retains fee simple ownership.

3. There is no capital gains. Usually there is an option to buy and option money is tax free to the owners.

4. And, for old owners, his best payoff is when the owners dies, he would negotiate his option to buy with the heirs, the best part being heirs are often in a rush to get their money, doesn't haggle. Then, if they resist, haggles, he can pull back and say, I'm not buying at this point.

5. The biggest payoff is the stepped up basis at death, its capital gains tax free to the heirs, which is another incentive to sell.

He tells us he finds his buyers by cold calling, calling owners that owned properties for about 30 or so years. My dad bought a mixed use commercial property in 1963, in the mid 80's got cold calls to sell his property, but none to NNN it. He bought it in 1963 for $25K and was worth 250K by the mid 80's. Greedy RE investors figured old owners who bought their properties years ago has no idea what it's worth, want to buy it cheap, and flip it.

Believe it or not, I got my first cold call this week, and I owned my property for 25 years.