The Monetized Installment Sale
Receive up to 95% of your Sale Proceeds…
A Monetized Installment Sale is another strategy based on an installment sale. It involves finding a buyer for your property, before transferring it to a third-party intermediary, who then sells it to the end buyer and retains the proceeds.
You then obtain an interest-only loan from a third-party lender that is usually around 95% of the sale price of the property. The cash proceeds from the loan are tax-free and you can use them immediately on whatever you see fit. If you use them for another business purpose, the interest is tax deductible.
An installment sale arrangement is set up between you and the third-party intermediary. The interest payments you receive are the same amount as the interest payments you have on the loan, making it a wash. The balloon payments on the loan and the installment contracts will align. And the capital gains tax is due when the installment agreement ends. In many cases, this is all set up in escrow accounts and the intermediary facilitates the payments on your behalf.
The upsides are that you get to defer your capital gains tax while still receiving a lump-sum of cash upfront, in the form of a tax-free loan.
On the downside, you still have to pay the depreciation recapture tax upfront and your capital gains tax is due in full at the end of the installment agreement.
If you have questions about the Monetized Installment Sale capital gains tax deferral method or would like a Broker’s Opinion on the Current Value of your Investment Rental Property, contact Andrew at (720) 710-1000 or Andrew@GoldenRealEstate.com or just complete the form below for a fast response.