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I haven’t seen any examples of taking a property I now own and converting to a Master Lease.
The properties I have in mind have good cash flow, which would improve with a new owner getting current financing, vs the terms that I have on the mortgages (yes, these are bank financed properties, done before I understood the value of owner financing).
I am willing to sacrifice a good chunk of the cash flow in exchange for the debt reduction.
In my area there are people buying properties for cash, but they are junker properties in bad neighborhoods.
The properties I have in mind are in fine condition, I rehabbed them myself in the last 8 years, have good tenants in place with leases into 2013. These would not be the typical (for Central Ohio) cash sales.
Can I sell a property and convert it? Should I?
Thanks,
Deb in ColumbusDeb
You could sell it then offer to manage the property using a master lease but finding anyone who would pay more than a WHOLESALE price will be tough.
Even houses in perfect condition are hard to sell to an investor unless they get a substantial discount ( 30-40%) There are just too many other great deals out there these days.
I’d love to sell all my rental properties in the United States to free up the cash to invest in great deals in Panama. They are also in perfect condition with new carpet, new paint, new air conditioners, new roofs… but the bet offers I get is still a huge discount which I’m just not willing to take. For example, I have a $125,000 house rented for $1250 to a great tenant. The best offer I got was $69,000 IF I would seller finance for 5 years. The best cash offer was $60,000. PASS!
I’d do better to sell with seller financing to the tenant then sell the note — maybe. Even note buyers want a HUGE discount these days because there’s just too much competition.
I’ve even talked to people who were facing a deadline with a 1031 exchange. They’d rather pay taxes than buy at a retail price.
If you can sell at a DEEP discount then keep an option for part of the upside, you may be able to find a buyer.
Five or 6 years ago, your plan would have worked great. But today, it’s a buyers market and there is an abundance of deals.
(Keep in mind, if you sell in 2012, there is a 15% capital gains tax. If you sell in 2013, there is a 20% capital gains tax PLUS a 3.8% federal tax on investment properties <part of obamacare>
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