Interest with seller financing.

[Christina Davis]

Hi All,

I am looking to purchase a property with owner holding the whole note. Right now I rent from him. The property was purchased as a fixer upper, an I had to do a few things to make it liveable. More works needs to be done. The property was bought at auction at a good price. He is about 65 and real estate is his income. I would like to approach him with an offer to buy the property. How I see it is at our respective ages we are in different places in life. I want to propose that instead of making money while maintaning the property as landlord, maybe if he could make the about the same in monthly mortgage payments, without the headaches of property management it would be good for him. Since he would be relying on this income we could propose the the mortgage would run it's entire length for his security. I think it would be a win/win for both of us. Also since we would be aiming for a specific payment, how would the principal/interest affect both sides. Would it be better for low sale price and higher interest rate or higher sale price low interest rate to achieve the desired payment. Thanks in advance for your help.

[Richard Warren]

Originally posted by Brian Levredge:

As far as the interest rate is concerned, most states have usury laws that must be complied with which means the interest rate can't be astronomical.

There is another side to this as well. The IRS sets an Imputed (or assumed) rate of interest. If you set a very low rate of interest they will use their assumed rate for tax purposes. I have sold properties offering seller financing. If I am going to hold a note I expect to get a higher purchase price AND an above market rate of interest.

:cool: