1. Investment Financing Strategies
Chapter 14
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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.
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3. Seller Refinances Prior to the Sale
• Seller can refinance the property in order to
secure a loan that can be assumed by the
buyer
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4. Trading on Seller’s Equity
• Buyer refinances property instead of assuming
the existing loan
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5. Equity Participation
• Sale-Buyback
• Splitting ownership
• Joint ventures
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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.
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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
process
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8. Distribution to Heirs
• Federal estate tax
• California inheritance tax
• Gift tax
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