Zero Cash Flow Properties Nationwide
We are the premiere source for all Zero Cash Flow Properties Nationwide. We maintain a off-line database of Zero Cash Flow Properties and are certain that we can accommodate your needs. Be sure to ask us about how you can satisfy your 1031 Exchange or 1033 Exchange quickly then pull out cash shortly thereafter without violating exchange rules!
Contact us to confirm our current inventory of single tenant, bond net leased zero cash flow properties.
Zero Cash Flow Properties are very valuable to many a 1031 or 1033 Tax-Deferred Exchange or for estate planning. These properties come with highly-leveraged loans that are not available to the general public. Zero Cash Flow Properties are also popular choices for estate planning, trusts and pensions who enjoy the income generated after the debt is paid off. This remainder income is then left to heirs. Zero cash flow tax planning benefits include satisfying exchange requirements with very little equity plus interest and depreciation deductions.
How valuable are zero cash flow properties? Below are a few examples:
1. Selling a property with High existing debt and very little cash left over.
• Sales Price: $10 million
• Total of all loans: $9 million
• Cash left over: $1 million.
• 1031 Exchange rules say you must buy a property for $10 million or more of which the entire $1 million must be used in the new purchase, and, you must replace at least $9 million in debt. Any shortage is called -śboot-ť and subject to capital gains. Where can you find a property with $1 million down and a 90% loan? Probably non-existent.
• Zero Cash Flow Solution: By utilizing zero cash flow properties, a buyer can get very close to achieving this replacement property goal with little down coupled with high leverage.
• Result? Satisfy the exchange and avoid capital gains!
2. Selling a property with little to no existing debt and lots of cash left over.
• Sales Price: $20 million
• Total of all loans: $0.00 (owned free and clear)
• Cash left over: $20 million.
• 1031 Exchange rules say you must buy a property for $10 million or more of which the entire $10 million in cash must be used in the new purchase, and, you do not have to get any new financing.
• Most in this fortunate situation feel that they would like to take out some of this cash. Any amount less than the $10 million in cash not spent on the new purchase is subject to capital gains taxes. The natural path would be to purchase something for all cash, then refinance the money at a later date.
• Zero Cash Flow Solution: Purchase $10 million in zero cash flow properties and shortly thereafter, pull out up to $8 million in cash Tax-Free utilizing a one-time allowed paydown/readvance feature that we will want to make sure comes with your properties.
• Result? Satisfy the exchange, pull out the cash and then take your time to buy the property you might really want without being forced with exchange time constraints.
3. A perfect tax-planning gift for a child or grandchild.
• Buy today and watch the property fully amortize over the childhood and teenage years of your loved one. At the end of the lease, the property is owned free and clear.
For the examples shown above, these zero cash flow properties tend to move very quickly.
Recent true transactions:
(1) We sold a zero cash flow store to buyer with $10 million in cash and $12 million in debt to replace from a prior 1031 sale. The buyer closed with the full $10 million dollars and subsequently refinanced the property to pull out $8 million. In the end, the Buyer sheltered gain on a $22 million sale, pulled out $8 million cash tax deferred, and owns the $22 million store on a bond net lease for $2.2 million in cash.
(2) Large Apartment and Commercial Office Building owner accepted an offer and closed on one of their properties, a $65 million Commercial Office Building. With the 45-day clock ticking down, they were not finding any suitable replacement properties and were in a serious tax bind. Of the $65 million, $45 million was cash and $20 million was debt. The buyer closed on a $65 million zero cash flow portfolio and within 2-3 weeks, pulled out $40 million in cash. With $40 million in hand tax-free, they could now take their time in negotiating a purchase of a replacement property without the gun to their head. Alternatively, they could place this cash in whatever other investment they want, even the stock market if they want. In the mean time, they not only sheltered their gain, but immediately enjoyed lots of tax benefits in the way of interest and depreciation expense on the zero cash flow portfolio.
Avoid hidden traps found in exchanges
1. Not enough time to find replacement properties.
Starting from the closing date of a sale, a 1031 exchange allows 45 days to identify up to 3 replacement properties (or the 200% rule) and 180 days to close on specifically one of the properties identified in the 45-day period. That's a lot of pressure! Zero cash flow properties have all the work done already and are waiting with a ribbon on them. These properties can close as fast as 1 week.
2. Losing negotiating leverage on a sale and in repurchase.
Rushing to sell to take advantage of a possible property, then rushing to negotiate the purchase of the replacement property results in lost leverage in negotiation on both ends. This usually results in a sale for less than what you could have received, and a purchase at a higher price than you could have bought for had you had more time and leverage. Again, a lot of pressure! Zero cash flows are there for you. Take your time on a sale knowing we have ready properties (inquire).
2. Replacement properties crashed and burned.
What happens if 2 of the 3 identified properties crash and burn? What happens if all 3 fall off the vine? Yes, pressure all over again! We generally have suitable replacement properties that we can match to your needs.
3. Seller of replacement property causing delays.
Could a seller place pressure on a buyer knowing that their property is one of 3 that have been identified in an exchange?
4. Cannot find a bank who can loan at high leverage.
Banks have dropped their LTV amounts due to the economy we are in. Zero cash flow properties consistently offer single tenant, highly-leveraged investment grade properties.
5. Most banks will not allow a refinance after closing.
Planning on pulling out cash after a purchase through a refinance? Today, this is a well known high risk plan. With zero cash flow properties, take advantage of a one time feature that allows cash to be pulled out with NO REFINANCING FEES!
Merits of zero cash flow properties...
• Very High Leverage (typically 85% to 90%); These are a vehicle to cover large debt requirements with very low equity (typically for 1031 trades) ; These provide the ability to cover large condemnation proceeds with relatively low equity (for 1033 situations) ; These properties can close in as quick as seven to ten days if needed and the due diligence is typically very simple. The potential for above market returns when calculated over extended periods of time (see below).
• NNN Bond Lease Summary: The "bond" lease structure is the most secure form of real estate lease for an owner/landlord. Overall the tenant assumes virtually all risks and responsibility of ownership over the lease term. Following are the basic terms of a "bond" lease: Lease Term: 20 - 25 years
• Exposures: Tenant is responsible for all costs including operating expenses (CAM, real estate taxes and insurance), maintenance, repairs and replacement.
• Landlord Responsibilities: None Assignment/Sublet: Tenant has the right to assign/sublet the lease although the guaranty shall remain in full force and effect.
• Casualty/Condemnation:Tenant assumes risk of casualty and condemnation.
Zero Cash Flow Properties Available Nationwide
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Below is a very short list of zero cash flow properties. Please contact us at (800) 664-1031 to receive an updated inventory as these properties change quickly.
Zero Cash Flow Properties Nationwide - Short List