Obtain Property From My Father

[Matt Weiss]

Hi All, 

First post, long time lurker and I haven't been able to find a post that addresses my situation.

My dad owns a 4-plex multifamily worth about 180k. He owes about 90k on it and around 13 years remain on the mortgage. The property cash flows 2400 a month and has a killer location.

He's owned it the last 20 years and he's getting burned out. He wants to sell it OR be hands off. He's open to something creative, rather than taking the windfall of a typical sale.

My goal is to obtain the property and maximize the value for myself and my dad. Below are what I know as options.

1) Conventional - My dad gets the lump sum, but I don't get any benefit 

2) Land Contract - My dad wins the "long game" with financing it to me, maybe he'd offer a price break.

3) Living Trust or Land Trust? - Is there a creative way to use either of these to acquire this? How would that work if possible?

4) Is there another way family can obtain property in a situation like this?

Any insight into how you might go about this would be much appreciated.

Thanks,

Matt

[Jeffrey S. Breglio]

There are a lot of moving parts in this and with many options that really depend more on what the parties want to get out of it, as both @Karen Margrave and @Tim Hoffman have stated. Tax benefits, depreciation, step up in basis, taxes down the road, income streams, lump sums, etc.  I would figure that out clearly FIRST, then decide the structure, rather than vice versa. 

To add in another alternative, your dad can "gift" up to about $17K each year to you tax free. You can provide management services and he slowly gives you ownership. He steps out of the work loop, he gets income for awhile that slowly goes down, and you get ownership over time and income that goes up over time. This might move faster than waiting for him to die. I generally structure this in a partnership LLC where each year you would get more of a percentage ownership. This takes working closing with your CPA. I trust could accomplish the same thing, but the LLC works better.

The living trust and land trust are different in that they have different purposes. Either could be used to structure the deal. Typically it would be the family living trust to give you the property at his death. And the land trust to change ownership sometime before that.

I'm not a fan of land contracts. They seem to create more problems than they solve. And the IRS can look at an installment contract (which that is) and deem it a "sale" right up front and force him to pay taxes on the next gain. Check with your CPA.

It'd be wise to spend 15 - 30 minutes talking this over with an attorney and your CPA! 

Jeff