Retire from being a landlord, not from being an investor.
Wealth Preservation Strategy Packet
Keep More Money in Your Pocket
What exactly is an installment sale?
It is a way to sell your property where you "become the bank." Instead of a buyer giving you all the cash at once-which can trigger a large tax bill-you receive a down payment today and the rest in steady monthly payments. You only pay taxes on the profit as you actually receive the checks.
Can I do an installment sale if I still have a mortgage?
While possible, it is highly recommended that you either own the property free and clear, or have a high equity position with a small remaining balance on your mortgage. This keeps the transaction simple and ensures that your monthly checks are maximized for your retirement.
Is my money safe?
Yes. In Texas, we use a Deed of Trust. This is the same legal security a bank uses. If a buyer stops paying, the property serves as your collateral. You have the legal right to take the property back, keep the down payment, and keep all the payments made to that point.
What is "Passive Income" in this context?
True passive income means you don't have to work for it. There are no more repair bills, no management fees, and no midnight phone calls. Your only "job" is to receive a payment, much like a pension or a steady bond.
The Tax Professional Conversation Starter
The following questions are designed to help your tax professional model your exit.
The "Bracket Protection" Analysis
"If we spread the profit from this sale over several years instead of taking it all now, how does that affect my tax bracket? Could this strategy help me stay in a lower bracket compared to a lump-sum sale?"
Protecting My Benefits
"A large one-time profit can sometimes cause Medicare premiums (IRMAA) to increase. Would an installment sale help keep my annual income stable enough to avoid those types of surcharges?"
Budgeting for the "Recapture Tax"
"I have taken depreciation deductions for years. Since I know some of that is 'recaptured' at the time of sale, how much of my down payment should we set aside to cover that specific tax in Year 1?"
Income Type Comparison
"Currently, I report rental income and expenses. If I switch to receiving principal and interest payments from a buyer, how does the complexity of my annual tax filing change?"
Estate Simplicity for Heirs
"When it comes to my legacy, is it generally simpler for heirs to manage an inherited income stream (the Note) versus an inherited physical property that might require ongoing maintenance or a forced sale?"
For educational purposes only. Consult with your tax professional.