Exploring Creative Solutions for Down Payment and Tax Avoidance

[Tyler Speelman]

I have a sibling who is looking to sell two single-family rental properties but is concerned about the tax implications. Currently, he rents and needs a down payment to purchase a primary residence. We're exploring creative ways to provide him with the cash needed for the down payment while avoiding triggering a taxable event.

One strategy we're considering is purchasing his future primary residence ourselves, making the mortgage payments, and then, once we've built enough equity—comparable to the appraised value of his rental properties—transferring the title to him as a form of exchange.

What are your thoughts on this approach? Additionally, do you have any other ideas or strategies that might help achieve his goals without incurring a tax liability?

[Gamal Harding]

Hey @Tyler Speelman- 

2 options to consider:

1. Seller finance the property- ask for an up front, non-refundable down payment of $XXX (which could be used as his primary residence down payment), payments of $X over X years at X interest rate with a balloon payment in X years

2. Take out an equity line of credit on the property that can be sides as the down payment for the primary residence. They may need to be careful on this one as that may impact his DTI ratio. if his income is strong enough and not as much debt, he should be OK

Hope that helps..