Multifamily Creative Deal in San Francisco

[Florent Breton]

Hi BPers 👋

I'm calling creative minds here to bounce ideas around a house hacking opportunity.

The building:  San Francisco based 3 unit building. I'm renting out one unit and the owner does not live on site.

The opportunity: The owner is advanced in his retirement and wants to offload some properties from his portfolio. He wants to give us an exclusive look into the deal. We have a great relationship and would really want us to buy him out!

The numbers: Market value $2M, fully paid out and depreciated since mid 1900s. Gross rental income +/- $10K / month, including our unit.

His goals: He wants to reduce his tax exposure and also wants to donate some of the proceeds to charities via a Charitable Trust. He is also open to owner financing.

Strategy #1 - The Charitable Trust

For the seller: he gets a tax break over the first 5 years and receives an annual income from the trust itself.

For the buyer: well, not sure what's in for us in that context. We'd buy from the trust and would have to secure a conventional loan.

Strategy #2 - Owner financing

For the seller: he does get annual income, a lower tax exposure than via a conventional sale. But there is no charities benefiting from the sale.

For the buyer: we can get better financing terms than what the market offers right now. Possibly, low down payment and a low rate.

What other strategies would come to your mind?