Capital Gains and Seller Financing - Advice Needed

[Tom Horan]

Hey BP -

I’m looking for some capital gains tax advice as I try to convince a seller to owner finance a multi unit property.

From a tax benefit standpoint for the seller, is it more beneficial for him to sell at a lower purchase price and get higher interest rates OR sell at a higher purchase price, and lower interest rate. I can certainly crunch the numbers but I’m asking the question specifically from a capital gains tax standpoint. I would think lower purchase price and higher interest rate would be more beneficial for him. Is this thinking correct?

Thanks in advance. Tom

[Tom Horan]

@Steve Vaughan - Appreciate the insight. That makes sense - I'm assuming this all depends on the owners tax bracket as well. I am far from a tax expert, I just want to have a general understanding of the tax benefits from owner-financing. Still working on the numbers a bit - and need the owner to feel comfortable with this concept.

2 properties next door to each other zoned for mixed use residential/commercial. Also another building out back with an apartment and shop space making 5 units for revenue (I feel there is value add potential as well for another unit or two)

These are the numbers I'm shooting for in an ideal world:

Purchase Price: $550,000

Down Payment: $50,000

Interest at 6% for 5 years with a balloon amortized over 30 years.

I need to see the books to be sure of these numbers - but I'm being told $6,000 in monthly rent. The numbers look good with those figures, but we'll see what happens! Thanks again Steve.