Selling Your Rental Portfolio Without the Year-One Tax Bomb
You've held a portfolio of single-family rentals, duplexes, or small multifamily for 15-30 years. The portfolio is fully depreciated. The market is at or near peak. A national SFR aggregator (Invitation Homes, American Homes 4 Rent, Tricon Residential, Progress Residential, AMH, Front Yard Residential) or a local 1031 buyer is offering 7-8 figures. A 1031 only works if you're staying in real estate. If you want OUT, lump-sum cash means handing back 30-40% to federal + state in year one — long-term capital gain on appreciation PLUS §1250 unrecaptured depreciation on the buildings, plus §1245 recapture on appliances and personal property.
Buyer cash → Assignment Co. → A-rated carrier → You, on schedule
IRC §453 structured installment sale defers both across a payment schedule of your choosing, backed by a major life carrier.
The math — $5M portfolio sale, 25-year hold
Assumes $5M sale, $1M basis after $1.5M accumulated depreciation. §1250 spreads under §453. Carrier yield ~5% on the deferred balance — additional benefit not shown in delta.
Rental-portfolio-specific tax wrinkles
- §1250 unrecaptured depreciation — spreads under §453. The §1250 portion is taxed at 25% federal maximum (not the lower LTCG rate). Across 10 years, you stay below the lifetime §1250 stack-up that hits lump-sum sellers.
- §1245 recapture on personal property — appliances, HVAC units, water heaters, security systems, carpet (under cost-segregation studies) are §1245 personal property. Year-one recapture, NOT deferrable. Get the allocation right at the PSA.
- Cost segregation hangover. If you ran cost-seg studies for accelerated depreciation in years 1-15, you have more §1245 recapture exposure on sale. Model this.
- Passive activity loss carryforwards. Any suspended PALs become fully deductible against the sale gain in year of disposition. Can offset some of the year-one taxable income from §1245 portion.
- 1099-S reporting and §6045 broker reporting — affects information flow but not the §453 mechanic.
- NIIT (3.8% Medicare surcharge) on investment income above thresholds. §453 spread keeps you below NIIT threshold per year for moderate portfolios.
- State residency at closing. Particularly relevant if you've moved or are about to.
Aggregator vs local buyer
- National SFR aggregators (Invitation Homes, AH4R, Tricon, Progress, AMH) — sophisticated counsel, routinely paper §453 deals.
- Local 1031 buyers — usually want to close in 30-45 days. §453 paperwork can fit but counsel needs to know what they're doing.
- Family-office buyers — long-term hold strategy, may want to negotiate the §453 mechanics in their favor (carrier choice, payment schedule).
When this fits
- $2M+ portfolio sale
- 10+ year hold (meaningful §1250 recapture exposure)
- Exiting rental real estate entirely (not 1031-ing)
- Buyer's counsel willing to paper the assignment
When it doesn't
- Full 1031 into another property (different strategy, generally better if you stay in RE)
- Sale under $1.5M
- 100% rollover into the aggregator's OP units
How I work
Hans Goldstein, IRC §453 specialist. an A-rated Fortune 500 carrier / an A-rated Fortune 500 carrier / an A-rated Fortune 500 carrier / an A-rated Fortune 500 carrier — 50 states. Free 15-min fit-check. Bring portfolio size, hold period, basis, prior depreciation, offer terms, residency state.
Frequently asked
Q: I'm doing a partial 1031. Can §453 handle the cash boot? A: Yes. The 1031 portion defers via like-kind. The cash boot is taxable — and §453 spreads that taxable boot across years.
Q: My portfolio has 12 properties. Do I structure each separately? A: Usually no. Most aggregators close the whole portfolio in one transaction with one PSA — and one §453 assignment. Some sellers want partial cash + partial §453 across all properties; that's negotiated at PSA.
Q: I've taken cost-seg studies. Does that disqualify §453? A: No — but it raises your §1245 recapture exposure in year one (the §1245 portion isn't §453-eligible). Allocate carefully.
📘 Get the free Seller's Guide to §453 + a fit-check
A plain-English guide for sellers: how a structured installment sale defers the tax when you sell a business, practice, or property — the math, the alternatives, and how to know if your deal fits.
Drop your info — instant PDF download + within 1 business day Hans will email a preliminary read on which structure fits your deal. No retainer. Carrier compensates the broker — not you.
📞 Hans Goldstein · 213-726-0518 · CA Insurance License #4322192 · Independent §453 specialist · Goldstein & Co. LLC
Educational. Not tax or legal advice.
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 213-726-0518