Owner's Step up in Tax basis is his reason for not selling apartment building.

[Scott Albritton]

Hi All, 

I hope you're having a nice weekend! 

I currently live in an 8 unit apartment complex here in San Diego, CA. And I want to figure out a way to buy it.. It's currently under market rents, needs some updating..

I spoke with the owner the other day and asked if he'd be willing to sell. He said he wouldn't be selling until he passes away. In other words, his wife (and children) would most likely want to sell the property upon his passing. He mentioned the reason for not selling now is the step-up in tax basis and thus his heirs wouldn't have to pay taxes on the sale. 

If I'm understanding correctly, upon his passing, if the property appraised for $4mil and they purchased the property for $300,000 40 years ago, the family would incur no taxes on the profits. 

So, my question is, is there a way to still have the family benefit from the sale upon his passing, without having to pay the taxes, and have the property "sold" to me in the meantime? Would it be possible to have a written agreement that until his passing, they would continue to receive say, $14,000 in monthly "rents"? Essentially acting as the bank in the short term? Then when he does pass, we could have a balloon payment to match the current market value.

Is this even possible? Any and all advice would be great! 

Thank you,

Scott