When you sell $700k property you have to buy $700k worth of property to defer all taxes not just the amount you have in profit.  2) When you did the exchange your “tax basis” for the two properties you bought would be reduced by your profit.  

. $204,500 @ 17.5%– $35787Estimated Net Proceeds to Seller$350,213Owner Finance: OFFERSale price 350000 Down payment $20,000 Owner finance note for the remaining: $330,000Interest rate: 3%Term: 30 years (fully amortized)Balloon payment: We pay off the entire remaining balance after 8 yearsWhat you actually receive over the 8 years.Down payment (day 1) $20,000 pure cash profitMonthly payment (years 1–8) $1,392.97/mo × 96 months = $133,725Part principal, part interest Of that $133,725: Interest portion ≈ $71,150 your profit minus taxesPrincipal portion≈ $62,575Balloon payment at end of year 8 ≈ $267,425 (remaining balance) capital gains Total cash you receive over 8 years≈ $421,150Your true profit (down + interest)≈ $91,150Estimate Closing Cost ($5,200)Capital gains ($35,787)Net Proceeds $380,163 Never provide owners advice on owner financing.

Should split roughly $80,000 profit 4 ways.

Ideally we are looking for a single family home (3+ bedrooms) in an area where STRs are profitable.

They chase designer kitchens, luxury flooring, and features that look great on Instagram but add nothing to long-term profitability.

I estimate total construction costs will be around $1.3M–$1.4M.His initial idea is for me to cover the construction costs, and then we split the profit once the project is sold.How would you recommend structuring this deal?

That’s a big deal when you layer that profit on top of your W-2 income.From a tax perspective, the tradeoff looks like this:• Flip: the $60K gets taxed like regular income, so plan for a heavier tax bill.

Quote from @Rob Howard: @Joe Villeneuve except that he can sell it at any time probably for a profit in addition to the cash flow. 

.• Whatever cash-out is left goes to LLC #1 as profit or return of capital.• If LLC #2 didn’t pay the full amount yet, record it as “Due from LLC #2” (intercompany receivable).In LLC #2 (the holding LLC):• Record the property as a new asset at the amount it refinanced for.• Record the new long-term loan.• If you paid LLC #1 with cash-out or equity, record that as “Due to LLC #1” (intercompany payable).Big picture:LLC #1 got reimbursed for all the money it put into the project (purchase + rehab) and keeps any cash-out.LLC #2 now owns the rental and carries the new refinance loan going forward.It’s simply an intercompany transfer wrapped around a refinance.Two sets of books, two clean entries, and the numbers stay honest.

Would love to discuss the kinds of profit splits and preferred returns that work for you.