Ask Terry Questions Selling a investment property 3 flat that I own for retirement.

Selling a investment property 3 flat that I own for retirement.

By Terry Savage on November 04, 2023 | Housing / Real Estate

Hello Terry,
My wife and I own an investment property 3 flat near Wrigley Field. We’ve owned it for 45 years now. We paid only $70,000 for it 45 years ago. Now it’s worth $1.1 million. Our tenant wants to buy the building from us directly on contract for deed, with no money down, and make payments to us for anywhere from 3-5 years, and then have a balloon payment of whatever is owed at that time.
My question is what in your opinion is the best approach to selling the building on contract for deed, otherwise know as an installment sale, without getting clobbered with income taxes, state and federal?? Our tax basis is very low, if any at all. Please let me know what you think is the best approach for us to take here. The income derived from this sale would be a part of our retirement income. My wife is 72 years old, I’m 69 years old. We listen to your show on WGN radio a lot with John Williams.

Thank You in Advance Terry, ????

Terry Says

You need a sophisticated accountant and attorney to make sure you’re doing the right thing.
You don’t say whether you depreciated the property over the years, and will have to recapture all those deductions on sale.
I hope you kept a record of all the improvements you made to the property to adjust your cost basis higher.
And this will all translate into a capital gain when you sell, so your accountant can determine the amount of taxes you will owe.

Let me say one thing: Entering into an installment sale contract is fraught with risks. I suggest you let the buyer do the financing with his/her bank — and pay your the entire amount on sale of the property. Then you can reinvest the proceeds in T-bills, currently earning about 5.5%, and never worry about what the buyer is doing with your property, or future property tax bills, or the buyer’s ability to maintain the payments.
In other words — don’t do this deal!! Get a Realtr and sell this property outright now — before the recession hits!



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