g with poor conditioning. The property’s in poor condition, same situation as this here. If a property suffers from this, and the seller still wants to sell the property, the only way to get his price is to do creative financing.
Let’s say the property is in good condition, but the seller is not. What if the seller kept no books and records on the property? Amazing as it sounds, a lot of commercial owners keep very poor records of their income and expense. It doesn’t allow you to validate how much the property makes.
If it doesn’t allow you to validate it, the bank is going to have the same problem, so the bank is not going to give you the dollars you need to buy the property. The banks may do that, but they may want to ask for a large down payment to protect their downside, and the deal makes no sense. When the property’s okay, but there’s nothing to substantiate the pricing, that’s when creative financing may come into play.
Capital Gains Taxes
If the property has been a rental/investment property, and not the owner’s primary residence – the seller may need to worry about capital gains tax. Some sellers use seller financing (the owner is the bank) to mitigate their concerns about paying taxes when they sell. We can mitigate it by spreading out over time his capital gains taxes. If you want to know more about an installment sale, and how the taxes work, look at IRS Publication 537. Installment sales are a creative financing solution with huge benefits for sellers that can be flexible.
The seller needs a quick sale because of a life situation. For example, if the seller is ill, going through a divorce, or being relocated, he needs to sell the property quickly. Sometimes, for privacy’s sake, a seller does not want to list a property on MLS or online, and wants a quick sale. When a life circumstance requires a quick sale, the best way is to do creative financing.
Creative financing helps us structure deals that nobody else can do.