Best way to owner finance for retiring landlord?

[Daniel Dietz]

Hello All, 

I have found a local landlord that is getting up there in age and wants to ease out of being a landlord. He has 7 out of 10 of his duplexes left that are all in very good shape and fit our investing criteria as far as rent-to-price ratio goes. He IS open to maybe doing some kind of Seller Financing IF it is beneficial to him financially. 

One of his concerns is the taxes that he would have to pay when he sells. I do not think he really needs the money for income since he has a pension, SSI, etc.... He stated on the last one he sold for about 150K that his tax bill was about 20-25K between deprecation recapture and capital gains goes. He would like to minimize that, as he sees it as 'money down the drain'.

I believe on average he might have about about a 50K balance on a house valued at 150K, meaning he might 'net' about 100K before paying taxes.

My one thought of what *might* be beneficial to him tax wise would be if we got a bank loan for say 100K and have him carry a second for 50K interest only for 5-7 years at say 5%. My thoughts are that the 100K would give him enough to pay off the note, pay the taxes and still have maybe 30K or so left. Then, if he sold one a year (that is kind of his thought to not pay all the tax at once) the Seller Financed Notes would start coming due the year after he was done selling them - one a year for 7 years.

Does this seem to make at least remote sense? :-) He is going to 'talk to his tax guy', but I also know his tax guy and he is NOT a specialist in real estate at all, so not sure how much that will help.

Thanks, Dan Dietz

[Daniel Dietz]

@Tom S. I forgot to mention that part :-) Our portfolio lender that we use will lend up to 80% LTV and the other 20% can be a combination of our down (they like to see 10%) and a second that can be either the seller or a private lender, as long as the numbers still make sense.

At this point in time, I want to stretch my capital as far as practical when I find the right deals and can lock them in while rates are still low. I am mainly looking to create as much cash flow and equity as I can at a point 10-15 years down the road when I retire. To me, that is a bigger concern than current cash flow now.

Thanks, Dan Dietz