INSTALLMENT SALE
Selling Your Storage Facility Through an Installment Sale
For many self storage owners, selling a property can create significant capital gains taxes. An installment sale structure may allow owners to sell their facility while receiving payments over time instead of a single lump-sum payment.
Sperry Self Storage works with facility owners to explore flexible transaction structures that align with their financial goals.
WHAT IS AN INSTALLMENT SALE?
An installment sale is a transaction structure in which the seller receives payments for the property over time rather than receiving the entire purchase price at closing.
Instead of a single payment, the buyer makes scheduled payments to the seller according to agreed terms.
These payments typically include:
- Principal payments
- Interest income to the seller
- A structured payment schedule
This structure can allow a seller to spread the recognition of capital gains over multiple years rather than all in the year of sale.
WHY SOME STORAGE OWNERS CONSIDER INSTALLMENT SALES
Many self storage facilities have been owned for decades and may have a very low tax basis.
Selling the property in a traditional transaction can result in a large tax obligation in the year of sale.
For some owners, an installment structure can provide:
- A predictable income stream
- Potential tax deferral benefits
- A smoother transition away from active management
Every owner’s tax situation is unique, so these structures should always be reviewed with a qualified tax advisor.
HOW AN INSTALLMENT SALE WORKS
While each transaction is structured differently, a typical installment sale may involve the following steps:
1. Sale Agreement
The owner agrees to sell the property to the buyer at an agreed purchase price.
2. Initial Payment
The buyer may make an initial payment at closing, sometimes referred to as a down payment.
3. Ongoing Payments
The remaining purchase price is paid to the seller over time according to a payment schedule that may span several years.
4. Interest Income
The seller typically receives interest on the remaining balance, creating a predictable income stream.
POTENTIAL BENEFITS OF AN INSTALLMENT SALE
For certain owners, installment sales may offer several advantages.
Income Over Time
Rather than receiving the full purchase price at once, the seller receives payments over time that can provide ongoing income.
Potential Tax Deferral
Depending on the structure and applicable tax rules, installment sales may allow sellers to spread capital gains recognition over multiple years.
Simpler Transition
An installment structure can create a smoother transition away from operating the facility while still receiving income from the property.
WHEN AN INSTALLMENT SALE MAY MAKE SENSE
Installment sales may be attractive for owners who:
- Have owned their facility for many years
- Have a low tax basis in the property
- Prefer steady income over time
- Are transitioning toward retirement
- Want flexibility in how the transaction is structured
EXAMPLE STRUCTURE
While every transaction is different, a simplified example might look like this:
Purchase Price: $5,000,000
Initial Payment at Closing: $1,000,000
Seller Financing Balance: $4,000,000
Payment Term: 10 years
Interest Rate: negotiated between buyer and seller
Under this structure, the seller receives regular payments over time instead of receiving the entire purchase price in a single year.
FREQUENTLY ASKED QUESTIONS
An installment sale is a transaction where the seller receives payments for the property over time instead of receiving the entire purchase price at closing.
The buyer makes scheduled payments that typically include principal and interest.
In some situations, installment sales may allow sellers to spread capital gains recognition across multiple years rather than recognizing all of the gain in the year of sale.
However, tax treatment depends on individual circumstances and should always be reviewed with a qualified tax professional.
Yes. In most installment sale transactions, the buyer assumes operational control of the property while the seller receives payments according to the agreed structure.
Yes. Seller financing and installment sale structures are relatively common in self storage transactions, particularly when properties are owned by individual operators rather than institutional investors.
In some cases, installment sales can be combined with other transaction structures such as partial ownership transitions or joint ventures.
Each structure depends on the goals of the property owner and the specifics of the property.
START THE CONVERSATION
If you own a self storage facility and are exploring options for selling your property, including installment sale structures, we would welcome the opportunity to discuss your situation.
All conversations are confidential.
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