Owner Financing Offering 6% APR

[Luke Carnahan]

I am just starting to work on a deal for a 5-plex where the owner is offering financing at 6% APR. I am more familiar with APR with respect to credit cards and not so much with personal loans, so I wanted to reach out to the community and see if anyone would have any advice on pitfalls, risks to avoid, or strategies to consider with financing a deal like this. Any advice is appreciated!

[Scott Johnson]

Quote from @Luke Carnahan:

I am just starting to work on a deal for a 5-plex where the owner is offering financing at 6% APR. I am more familiar with APR with respect to credit cards and not so much with personal loans, so I wanted to reach out to the community and see if anyone would have any advice on pitfalls, risks to avoid, or strategies to consider with financing a deal like this. Any advice is appreciated!

I mean, APR works pretty much the same way. It's just a Per month compounding interest, as opposed to per diem, that's amortized over the term you agree on (normally 30 years).

I'd recommend creating an amortization table and printing it off to keep on hand with the promissory note. You can create one using my favorite tool, the 10bii Calculator (mobile and desktop).

I'd also get to know who's servicing the loan, whether it be the seller or a third party. Understand their rules/regs and keep track of payments. 

Otherwise, congrats on the deal!