I've been researching what the "going rate/average rate" of interest is being paid in MN and WI when asking the seller to do the financing. In MN, for a Contract for Deed, all I can find is that it is negotable, whatever buyer and seller agree upon. Are there any seasoned investors who can tell me what is reasonable? Also is it more or less if you are asking for a 2 year verses a 5 year balloon? Your advice is greatly appreciatedl
"Reasonable" is to be determined by yourself and the seller. Generally speaking, most sellers want to be cash out the faster the better. So, if you are negotiating, propose X interest for 2 years or Y interest for 5 years. Seller carryback is a great way to buy. You can potentially save money on application fees, appraisals, points, some closing costs, etc.
0% is nice.. :)
Seriously though.. could you maybe give more of background on what type of deal you're trying to accomplish, that would be helpful.
Sounds like in your state they do not have usury laws. Typically usury laws will limit the amount of interest that can be charged. I know recently I was sent an offer from some lending entity charging me 135% interest. I wondered what in the world !! I have always been used to the idea that the law prevents anyone from charging any more than 10% to 12% interest. I have to get around more I guess and research the laws of every place I plan to do business in.
I think if your statutes state that the interest can be anything that is reasonable it would also say something about market rates or common rates.
My logic states get the interest rate as low as possible. I'm going to be honest and say that being fair isn't all that important and that if the seller is willing to go for an extremely low rate, do it.
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