Monetized Installment Plans?

[Gary F.]

Looking at alternatives to offset or defer capital gains. Yes I know about a 1031 exchange so that remains a viable option. But I’d like to have more freedom with the monies such as buying on auctions or other investment strategies. Anyone done a Monetized Installment plan can share their experiences?

[Thomas Rutkowski]

Originally posted by @Tyler Kastelberg:

@Thomas Rutkowski

Thomas: I've had it explained to me as a 1.5% lender origination fee, and 5% dealer fee for facilitating the transaction. Am I incorrect to call it 6.5% of fees? Are you going to give me back 5% of the sale proceeds in 30 years?

 The first part is correct. The loan is for 95% and there are 1.5% in loan origination fees. There is no 5% dealer fee taken out of the loan. Again, just as a bank maintains an LTV ratio, the third-party lender in this case will not loan 100% of the contract value. This is the "monetization" part of the monetized installment sale. You have to compare the monetization loan and the 30 years of tax deferral to paying the taxes in the year of the sale. If you are better off, do it. If not, don't.

The installment sale will proceed for 30 years. You'll receive interest-only for 30 years and at the end you will get a balloon payment with enough to satisfy the loan. THAT is where the qualified intermediary/dealer takes their fee. You agreed to this on the sales side of the transaction, not on the monetization loan side. A 5% fee taken 30 years in the future. The loan is what it is. If you can find a lender willing to do a 100% loan, please let me know!