Best way to sell commercial property

[Monterey298sc]

Sell 2 commercial properties with buildings. My wife and I are still operating a family business in both properties. . 1 property has est value of 1.2-1.5 million, other about 450,000. No mortgages , We want to FIRE as soon as possible. Not sure what taxes , brokers fees, attorney fees will cost me. Will I have anything left for retirement. We have about 1.3 M in 401k. And 2 other home property’s. Another 125,000 in VG MM. we really need as much cash from these sales for retirement. What is best way to move forward.. I am 58 DW is 56 we both work in this business and will loose all income until SS. We are simply BURNED OUT. Thank you in advance.

 

[Ronstar]

Sounds like you are not trying to sell your businesses - just the real estate?

IMO, I would talk to a commercial broker familiar with the property areas. They would give you better advice than a stranger from the internet.

And talk to your tax person also. It may make financial sense to sell the properties in separate years. Or it make sense to lease 1 or both.

But if you are burned out, the best thing to do is to sell the properties asap to avoid further burnout.

 

[Another Reader]

In your shoes, I would talk to my CPA about the tax consequences of selling the properties before I made any decisions.

Does the business have any value? Is the value tied to the real estate in some way? If so, I would look into selling the business and leasing the real estate to the buyer. You would have some income from the real estate and some cash from the sale of the business to pay your expenses and no capital gains tax to pay on the real estate today. That would lower your withdrawal rate from your 401(k) that you can tap next year without penalty.

 

[gwraigty]

No answer for you, but is there a reason you made your title so cryptic? Adding the first sentence of your post to your title might generate more of the responses that you're looking for. And not waste the time of others who wander in trying to find out what it is you're talking about.

 

[Monterey298sc]

Sounds like you are not trying to sell your businesses - just the real estate?

IMO, I would talk to a commercial broker familiar with the property areas. They would give you better advice than a stranger from the internet.

And talk to your tax person also. It may make financial sense to sell the properties in separate years. Or it make sense to lease 1 or both.

But if you are burned out, the best thing to do is to sell the properties asap to avoid further burnout.

Our industry has changed so much that no one will buy the business, we have explored that the last couple years. So we will close at some date in the future and sell off properties. Market timing is a concern also. Pretty good now and slowly getting better.

 

[HI Bill]

Agree, you need to talk to a CPA who specializes in commercial real estate. I'm assuming you know how much you paid for the properties, and have tracked the capital improvements...should give you an idea about how much of the sales would be subject to taxation.

If you're goign to take a major tax hit, consider selling each property in separate tax years, and after your income drops.

 

[Monterey298sc]

Agree, you need to talk to a CPA who specializes in commercial real estate. I'm assuming you know how much you paid for the properties, and have tracked the capital improvements...should give you an idea about how much of the sales would be subject to taxation.

If you're goign to take a major tax hit, consider selling each property in separate tax years, and after your income drops.

Great question, 1 property was built in 1973 for 350,000 and a major remodel 15 yrs ago for 450,000. Now appraisals about 1.2- 1.5 m . How would taxes work ?

 

[aja8888]

Great question, 1 property was built in 1973 for 350,000 and a major remodel 15 yrs ago for 450,000. Now appraisals about 1.2- 1.5 m . How would taxes work ?

Were you depreciating the commercial properties as a business expense? If so, then there will be an adjusted basis for the calculation of the capital gain. You really should consult a tax professional if that is the case.

 

[ExFlyBoy5]

I assume this property is being used as your funeral home, correct? I only ask because sometimes those buildings (and how they are built out) *can* be difficult to sell. But, ALL of it depends on your area and *your* commercial real estate trends. Residential real estate tends to have local trends, but it's NOTHING compared to how complex the local market for CRE is.

I think I would try and figure out exactly how much you would need to net to assist in the funding of your retirement. Then armed with those numbers, have a sit down with a commercial RE firm and see what they might be able to do.

Edit: In a previous post, it mentioned that have "been trying to sell" for 10 years? How have you been trying to accomplish that?

http://www.early-retirement.org/for...-sell-off-property-s-93156-2.html#post2088210

We have been working on a sell for 10 yrs, in our area and market, no one is buying.

 

[brucethebroker]

Sounds like you are not trying to sell your businesses - just the real estate?

IMO, I would talk to a commercial broker familiar with the property areas. They would give you better advice than a stranger from the internet.

And talk to your tax person also. It may make financial sense to sell the properties in separate years. Or it make sense to lease 1 or both.

But if you are burned out, the best thing to do is to sell the properties asap to avoid further burnout.

1+.
(I am a residential RE broker). I would interview 3 commercial brokers who are well known in your area to get a feel for commissions and probable sales prices. Then, before listing, I would schedule a meeting with a CPA. It is hard to make decisions when you currently have so little information. Talk to the pros before moving on.

We looked into selling a rental property earlier this year. I ran the numbers (probable sales price), then contacted my CPA for tax advice. Prevented us from making a costly mistake.

 

[Sunset]

OP - you definitely want to explore this issue.
You should know about the tax implications, like have you depreciated the properties over the years, and the resultant recapture. Someone suggested a good idea that you can spread the actions over calendar years to cut the tax burden.

So far I see 3 choices

1. Sell the buildings (probably worst choice).
2. Sell the business (and lease the buildings to buyer, which you can sell later either to buyer or another landlord)
3. Sell the buildings to a landlord and lease them back yourself to keep running the business for few more years, then in a few years sell the business

I think number 1. is worst choice, because you say nobody wants to run this type of business, so who is going to live in a funeral home or use it as an ice cream shop. ?

The building will have a lot of trouble fitting some other use.


If you can make a living doing this, I don't see why you say nobody would want to buy the business.