Idaho Income Investment Realty


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Idaho Income Investment Realty

Idaho Income Investment Realty

Without proper planning, investors who have improved, maintained, and even filled their properties with good tenants risk selling those assets for less than true value or paying capital gains taxes that could have been deferred. After an investor has determined that there are valid reasons to dispose of property, the next decision is how to effectuate the sale.

Outright Sale and Lease/Options

In an outright sale, an investor transfers title to property in exchange for payment without keeping any interest in the property. The buyer either pays all cash or makes a cash downpayment and finances the balance of the purchase price with funds from a mortgage lender. If the investor has carefully considered the expenses, such as a real estate commission or unexpected repairs, and tax consequences – the local realty transfer tax and federal and state capital gains taxes – of an outright sale, this is the most expedient way to dispose of property.

For some investors, a short-term lease with the option to purchase may be more in keeping with their real estate investment plans. In such an arrangement, an “optionee” pays the owner for an option (also referred to as a down payment) to buy the property at a later date and then pays monthly rent for the duration of the lease. The owner and the optionee decide how much of the monthly rent is to be credited toward the purchase price. When exercising the purchase option, the optionee pays the balance of the purchase price with a conventional loan or other funds. The owner retains full ownership of (and tax responsibility for) the property until title passes to the optionee.