Owner finance

[soonermajic]

Is this a tax advantage or disadvantage?
Anyone have experience with it?
Good / Bad / Ugly....?

 

[cbchevy4x4]

Selling or buying?

 

[Car_Wash_Guy]

From the seller side, you spread out the capital gains and depreciation recapture over years lessening the hit.

From the buyer side, you can get into a wash, possibly would even less money upfront without having to deal with all the underwriting standards of a financial institution.

 

[soonermajic]

Selling...

 

[Rfreeman]

Biggest downside Coach is you don't get your capital back to reinvest or use in any other potential future investment. Your money is tied up with them and the property unless they are willing to give you a substantial down payment which I would ask for knowing the car wash business.

 

[Waxman]

another potential downside is the new owner not paying and then you having to take back the property in whatever condition it is in. If they default, the property will likely be run down. I think I would prefer getting all the money up front. But that's just my preference.

 

[Dan kamsickas]

Biggest downside Coach is you don't get your capital back to reinvest or use in any other potential future investment. Your money is tied up with them and the property unless they are willing to give you a substantial down payment which I would ask for knowing the car wash business.

One other big risk: The person or entity you sell it too bleeds the cash, runs it into the ground, and you end up with the site back needing mega bucks in repairs/upgrades.

 

[cbchevy4x4]

Selling...

To answer the original question, there are pros and cons which will be dependent on how the sale and payment arrangements are made. The vast majority of the time you will, at best, defer the capital gains to a later date in hopes that your income tax rate is lower. Id look at it from the regard of if i have my money up front how much can i make "investing" those funds in whatever medium you are comfortable with. If i were to sell today 100% owner financing would probably be off the table, i may be willing to carry 10% to 20% to facilitate a sale to occur if i were to be actively looking to retire, but even with that the bank would make you take a second seat in the event of default. I could most likely pay the caputal gains up front and make that and more back in a period of a 2 to 3 years investing wisely, and not have to worry if i was going to ever get paid in full.