Vendor Financing Capital Gain Deferal

[dannielsen]

Hi all,



I have an opportunity to buy a 4-Plex using some vendor financing.

Here is the situation keeping the numbers easy to use. Value is 400,000 and the vendor is willing to loan me the 20% ($100,000)

Q- assuming that I and the property qualify, which banks would be willing to look at financing this deal where I don’t put any of my own money into it.

Q- how does the vendor defer his capital gains on this sale if we set up the vendor take back with a 5 year term and the full 100,000 is payable at the end of the term in a one lump payment. Does the vendor get to defer the entire capital gain until he receives the full funds at the end of 5 years or does he just defer 100,000 worth of capital gain.



Thanks so much for your help.

Dan Nielsen

 

[jseib]

The vendor would deffer capital gains on the VTB loan amount but not the full selling price... At least until he is paid, so if it`s an interest only VTB loan then he would deffer for the full 5 years..

Can`t speak for all banks but every bank I`ve dealt with has wanted some "skin in the game" even with VTB...

 

[Thomas Beyer]

QUOTE (dannielsen @ Feb 26 2010, 01:37 PM) ...
Q- assuming that I and the property qualify, which banks would be willing to look at financing this deal where I don’t put any of my own money into it.
...
none

unless it is a private lender at 10% + interest rate !

QUOTE (dannielsen @ Feb 26 2010, 01:37 PM) ...

Q- how does the vendor defer his capital gains on this sale if we set up the vendor take back with a 5 year term and the full 100,000 is payable at the end of the term in a one lump payment. Does the vendor get to defer the entire capital gain until he receives the full funds at the end of 5 years or does he just defer 100,000 worth of capital gain.
he pays taxes on his first 300K - cost for the year plus taxes on 100K in 5 years