So I own a commercial building in SF with two units, one of which is my business. I am looking to sell the business, but the possible buyer wants to own the real estate as well. The problem is, the real estate is too expensive for him to afford after all the appreciation the last few years (more than doubled in value), so he's asking if he could buy just half of the property instead of the whole thing. So...the question I'm trying to figure out is, can a commercial building be in essence split up and only the one unit be sold, while keeping the other half? If so, how big of a process would this entail?

Owner finance the whole thing to him.

26.2 said:

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Owner finance the whole thing to him.

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Finance 2.2 million...? Plus don't I have to pay capital gains taxes all at once? Which I won't have in that scenario. And I can't do an exchange (which I was hoping to do) if I don't have the funds.

California law is its own beast, but in Texas you would have to file for a Condominium regime for the building, including setting up a POA, with dues, etc... Its a pretty big PITA, and requires a lot of attorney work and approval from the jurisdictions. I would imagine that it would be similar in CA and pretty expensive as well.

Probably not worth the trouble. However, to know for sure you would need to consult a local real estate attorney with Condo Conversion experience.

Bitter Old Man said:

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California law is its own beast, but in Texas you would have to file for a Condominium regime for the building, including setting up a POA, with dues, etc... Its a pretty big PITA, and requires a lot of attorney work and approval from the jurisdictions. I would imagine that it would be similar in CA and pretty expensive as well.

Probably not worth the trouble. However, to know for sure you would need to consult a local real estate attorney with Condo Conversion experience.

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Thanks. That's kind of what I figured.

WoMD said:

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26.2 said:

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Owner finance the whole thing to him.

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Finance 2.2 million...? Plus don't I have to pay capital gains taxes all at once? Which I won't have in that scenario. And I can't do an exchange (which I was hoping to do) if I don't have the funds.

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Given this, you should just sell the whole thing and 1031 into whatever you want to buy. $2.2m isn't crazy money in tech land. Maybe you even get lucky and buy into the cycle early bust. SF is overvalued right now so great time to be a seller. Good luck.

DallasAggie0 said:

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If I were you I'd definitely just lease it. Seems like selling half could cause a lot of problems.

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Lease with future option to buy at full market value.