Using a General Partnership to lessen taxes on Owner finance?

[Shane H.]

Hello all this thread is kind of an off shoot of THIS ONE so you can read there for some of the details.

I followed up with the owner last night on a whim as I had not talked to him in a while - we are supposed to meet again at the end of this week or next.  I also think I have a partner for this deal should we be able to work something out (someone I met off of BP as a matter of fact...think we'd be a good fit for the deal)

Anyways the owners main goal is to use his properties as a retirement vehicle and get mailbox money - - he is talking about structuring the deal where he gets a stream of payments over 30 years or so or at least have it structured that way - that aside, his main concern is taxes.

One thing we had talked about his possibly starting a partnership where we could come on as partners, then over time as he gets his payment/annuity payments if you will and his ownership interest is bought out over time, then as time progresses we'd be "earning" larger ownership stakes where his would go down to zero.

Would there be any advantage from the buy side on this?  I think there is potential here -though in the thread above there are a # of naysayers but if one listens to all the negative people a guy won't get much accomplished - most of the potential is in rehab on one property/getting fully leased, another property possibly tearing it down or doing major renovations and changing it's use to highest and best, one property is somewhat of a trophy in my eyes - it needs nothing done to it.  Highly desirable the way it is by anyone locally or any out of state investor.

So could someone help me understand how structuring a deal with a General Partnership would work?  Do I seem to get the overall idea?  I think my reservation about it would be, if we put in all the work and turn it around, does he share in the upside we created?  Id probably want that spelled out if we could that the upside goes to us and he continues to get his payments he's after as we discussed.

I think the reason he's interested in the GP is that he will still have an ownership stake or a way to take back control should we not perform which I dont blame him -- he is just looking to protect himself.  Maybe this would be the best solution besides an outright owner finance?

Any help would be appreciated - still working with this one -- and I'm realizing that the way he would like to structure the deal the cap rate I figured on paper in the initial thread is off base if you are really looking at the time value of money and the fact lets say $2.x million is spread out over 30 years with no interest.

So the 4 options we've talked about is he sells outright and 1031's into something of equal value and collects mail box money (I dont think he really wants to do this and I think any other local people will pay significantly less if buying up front)

Straight up owner finance

Master lease with a buy option at a predetermined price and point in time

General Partnership

Per the conversation yesterday he says he's bringing in $20k a month in rents between all the properties (I'm guessing he was rounding a bit but the figure is probably close to that)

Thanks for any advice ahead of time - if I can return the favor to anyone assisting I'll try my best.

(Also after typing this out - I think one drawback I potentially see to the GP is a possibility we would not be able to use a new basis for depreciation in the property?....we'd be stuck using whatever his basis and depreciation schedule was?....possibly the same with a master lease?)