What is it worth today?
Buyers pay for the income the building makes now: the rent, less the costs you pay, divided by the cap rate for your type of property. After 20 or 30 years of owning it, today’s number can surprise you in either direction. How commercial property is valued.
What you keep after taxes
Two federal taxes usually apply when a long-held building sells:
- Capital gains tax on the increase in value. Long-term rates are 0%, 15% or 20% depending on income, and some owners also pay the 3.8% net investment income tax.
- Depreciation recapture on the depreciation you took over the years, taxed at up to 25%.
State income tax may apply too. Ask your CPA for a net-proceeds estimate before you agree to a price, so you compare offers on what you keep.
Three ways to sell
- Sell for cash
- Simple and final. You’re paid in full at closing and you’re done with the building.
- 1031 exchange
- You put the proceeds into another property and defer the tax. You have 45 days to name the replacement and 180 days to close it, through a qualified intermediary. You stay in real estate.
- Payments over time
- Seller financing, or an installment sale. The buyer pays you monthly, so the gain is spread over several years and you get income. The risk is that the buyer stops paying, so a real down payment matters.
We pay the full price at closing. If your CPA prefers payments over time, we can talk about terms.
If your business is in the building
You can sell when you close the business, or sell the building now and keep running the business there by leasing it back while you wind down. Tell us your plan and we’ll work around it.
Take your time, and bring your family
Every offer comes in writing. Take it home, show it to your CPA, your attorney and your family, and decide when you’re ready. We’re glad to talk with your kids or whoever helps you with big decisions. Nothing gets signed at the kitchen table.
Find out what your building is worth
A straight ballpark in under 5 minutes, with the math shown.