Selling Strategy for Commercial Property

We’re going to talk about selling strategy for commercial property.  Thanks for tuning into the Real Estate Today Podcast.

I’m Bob Nelson, real estate investment broker with Pacwest Real Estate Investments.

I’m Marcia Edwards, residential broker with Windermere. Let’s talk not residential but commercial. Let’s go to what you’re coaching as you talk to sellers and they’re going to move their real estate. What are some of the strategies and approaches that you take at the onset to set them up for maximum success?

Bob Nelson: First of all, they have to identify what is the tax obligation, the capital gains obligation, of a sale at a price that is probably a reasonable market price. We don’t have to pinpoint the price in order to calculate the magnitude of the tax consequence of that particular sale.

If that sale produces a tax consequence to choose up a disproportionately large portion of the equity that they have on that property, they better be thinking in terms of a tax deferred exchange.

Marcia Edwards: Early?

Bob Nelson: Early.

Marcia Edwards: You’re talking right out of the gate.

Bob Nelson: Exactly.

Marcia Edwards: That’s essential because there’s so many time restraints and constraints.

Bob Nelson: Exactly.

Marcia Edwards: When you drop dead you can’t go back and fix it.

Bob Nelson: I’m working with a seller right now that has an apartment complex that they will be bringing to the market. They insist on having the replacement property clearly identified and generally under contract before they bring theirs on.
Now I can sell this property in fairly short … Excuse me. Let me state is different from that. I can produce offers on this property fairly quickly. So, the concern is, where does my client, the seller of this property, go in order to defer the capital gains treatment using a tax deferred exchange? That’s the key to that situation.

Marcia Edwards: That’s a huge part of the strategy. Once you’ve made that decision, I know that financing maybe you don’t want to get all the money out of your sale at one moment in time?

Bob Nelson: Right.

Marcia Edwards: Is another strategy to consider?

Bob Nelson: Well, there’s another situation where a person says, “You know, I am retiring and I’d like to have an income stream but I don’t necessarily want to own property in order to get to it.”

Marcia Edwards: And they’re in a good equity position?

Bob Nelson: And they’re in a very good equity position. Free and clear to fairly high equity in a property. They may decide to sell and carry the paper to contract. I refer to paper, this pressed deeds. They would prefer to carry the financing and receive monthly payments for the duration of the payback period. That’s a good strategy for some.

Marcia Edwards: Nice passive income.

Bob Nelson: Exactly. And they know exactly what it’s secures.

Marcia Edwards: I’m Marcia Edwards, Windermere Real Estate.

Bob Nelson: And I’m Bob Nelson, real estate investment broker with Pac West Real Estate Investments.

Join Bob Nelson and Marcia Edwards Eugene, Oregon, real estate experts daily at 5:30 on KPNW for the “Real Estate Today ” radio show.