Mark Moss explains why sellers finance property sales with minimal down payments: a larger upfront payment triggers capital gains tax, reducing their profit. He shares two deals: a $3.7 million Montana ranch sold for $1 down, and a $5 million RV park near Glacier National Park where the seller accepted $200,000 after learning about tax costs.
I just bought a ranch in Montana where I spend my summers, and I gave the guy a dollar down payment. Why? Why was a guy willing to sell a 20-acre parcel, 8,000-square-foot brand new build with a 3,500-square-foot brand new barn? Why was he willing to sell that to me? $3.7 million for $1 down. A couple of reasons why. One, he wanted $3.7 million because in his mind he's like, that's my locked-in profit. I'm okay waiting for a while because I'm just going to take that, pay a bunch of capital gains tax on it, and then I have to go find a new place for that investment to go. And the larger the down payment the seller receives, the more capital gains tax Okay, so an intelligent seller selling to you on seller finance does not want a down payment. My RV park that I bought just right down the road from Glacier National Park, $5 million. Eric, the seller's like, I want, um, it's a $5 million purchase. He says, I want $500,000 down. I go, Eric, you don't want any money down. You're going to pay $200,000 in capital gains tax on that down payment. You want as little amount of money as humanly possible up front that makes you feel safe. So we went, we settled for $200,000 down on a $5 million purchase.
