The Structured Sale ( Con’t )
June 22nd, 2007 categories: Investing in San Diego Real Estate, San Diego Real Estate, Selling San Diego Real Estate
One of the best ways to understand the Structured Sales is to think of it as an Installment sale with enhancements.
Understanding the flow is easily done with the following flow chart. Permission was granted for me to use this chart from Capstone Bay as they are assisting one of my clients currently working on a Structured Sale.
Flow Chart courtesy of Capstone Bay
When I was first asked to assist a client in referring an agent familiar with a Structured Sale in another state, I was only somewhat acquainted with it. I got busy on the Internet and discovered that this newer concept is not yet well know by REALTORS, many Financial Planners or even by many of the real estate tax specialists.
While this concept is certainly not for everyone, it may be well suited for even the smaller real estate investor, especially if they hadn’t intended on being a long term investor or want to just “Cash Out“. During the run up in property values over the last numbers of years, many owners were holding there properties expecting to cash out when it hits its peak. The market peaked and many find them selves holding property that was going to give them both top dollar and maybe a bigger than anticipated tax bite all at once.
With the Structured Sale having not been around very long, it gives the property owner a choice. If re-investing through the usual 1031 Exchange process is not an option, then it used to mean take all now , pay all the tax. With the Structured Sale it could be, taken over a period of time and pay the deferred taxes over that period of time. That is the principle behind an Installment Sale . The risks for the property owner though could be very high if the Buyer should default in the installments. With the Structured Sale or installment sale with enhancements as it is explained by the professionals, there is a guaranteed income paid over a fixed period of time and the taxes are paid at each guaranteed installment.
More to follow in Part 3. We will get more into the process of how the Structured Sale actually works.
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