Starting Out - Which Direction To Head? Analyze Me!

[Val Saph]

Hello everyone, new to BP. Hoping to get a ton of knowledge from this group. I have been listening to the podcasts for some time, and now want to start putting knowledge to work!

I'm in Michigan and looking for REAL advice given CURRENT market conditions.

First off let me tell you a bit about myself. I’m 36 and married with a beautiful 3-month old daughter. My wife and I both hold salary jobs that pay fairly well. I work for FCA Chrysler as a financial analyst and she works for a mortgage company out of Texas as a business analyst (IT).

I have been involved in my father's multifamily business since I was 12 years old. It's a 36-unit apartment complex built in 1992. I have held my own LLC for a few years now and am the sole property manager of my father's business (my only client). Honestly I'm burned out with day-to-day BS of property management and will soon be transitioning this to a professional property management company so I can focus on acquiring other properties. I believe my father is willing to let me "borrow" some cash to acquire a small property to start out. Not really where my head is at right now though. I am thinking big but also very green and want to minimize my mistakes starting out.

So let’s get down to brass tacks on my Dads business. It’s 100% paid off and valued around $2.5-$3M. He also has over $300K literally just sitting in the bank. We had an offer to purchase the property but we didn’t follow through due to capital gains tax hit (almost fully depreciated). What options do we have to minimize the capital gains? I thought his CPA told him that if he passed away, the family can SELL it within 12 months and not pay capital gains on the sale. Not sure if that’s accurate…

Would it make any sense for me to start a syndication and buy the business from him outright? I was thinking this could be a good “first deal”. Rents are currently lower than market and there is some room in the property to appreciate them through value-add changes. Problem is he’d still have to pay the capital gains tax on the sale.

I’m sure some of you are probably wondering about the will itself; he has the entire business willed to me but won’t just “hand it over” until he passes. I also have siblings that I’d have to deal with upon passing, which is why I thought maybe the syndication might be a clean way to formally purchase the business from him and get that part off my chest. Then when he gets a check he can do whatever he wants with it.