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Investment Financing StrategiesChapter 141
Sale-Leaseback• Owner of property sells it to an investor and, at the same  time, leases it back.• Seller-lessees retain p...
Seller Refinances Prior to the Sale• Seller can refinance the property in order to  secure a loan that can be assumed by t...
Trading on Seller’s Equity• Buyer refinances property instead of assuming  the existing loan4
Equity Participation• Sale-Buyback• Splitting ownership• Joint ventures5
Tax-Deferred Financing Concepts• Realized capital gains—the difference between the total  consideration received and the a...
Pyramiding Through Refinancing• Periodically refinance properties already  owned and use proceeds to purchase new  propert...
Distribution to Heirs• Federal estate tax• California inheritance tax• Gift tax8
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Ch 14 investment financing strategies

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Transcript of "Ch 14 investment financing strategies"

  1. 1. Investment Financing StrategiesChapter 141
  2. 2. Sale-Leaseback• Owner of property sells it to an investor and, at the same time, leases it back.• Seller-lessees retain possession while obtaining full sales price; free capital frozen in equity• Investor-landlord receives fair return on and of the investment in the form of rent during the lease term and ownership of a depreciable asset already occupied by a “good “ tenant; buying guaranteed income stream that can be sheltered through proper use of allowable deductions.2
  3. 3. Seller Refinances Prior to the Sale• Seller can refinance the property in order to secure a loan that can be assumed by the buyer3
  4. 4. Trading on Seller’s Equity• Buyer refinances property instead of assuming the existing loan4
  5. 5. Equity Participation• Sale-Buyback• Splitting ownership• Joint ventures5
  6. 6. Tax-Deferred Financing Concepts• Realized capital gains—the difference between the total consideration received and the adjusted book basis of the property transferred.• Recognized capital gains—profits that are actually taxable.• Owners can refinance their properties during their lifetimes, generating tax-deferred dollars for reinvestment. At time of death, properties receive step-up basis to fair market value and could be distributed to heirs free of potential income tax on any appreciation to time death.6
  7. 7. Pyramiding Through Refinancing• Periodically refinance properties already owned and use proceeds to purchase new properties• Anticipates that original property will increase in value over time• Capital gains are delayed through refinancing process7
  8. 8. Distribution to Heirs• Federal estate tax• California inheritance tax• Gift tax8
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