Newbie trying to structure seller finance deal

[Ken Nyczaj]

Structuring a seller finance deal on a small MF property. Curious what the consensus is for how it should be structured and pros vs cons of the below example:

10% down and 4% interest only with balloon payment at 2 years or 5 years. Refinance with local portfolio lender at balloon payment and pay back the seller the principal amount.

Not sure if it is wise to be going 5 years interest only and building no equity in the property besides how much it appreciates and my down payment. Being that small MF in this area don't appreciate much, at 5 years I still won't have much equity.

Or:

10% down and 4% interest amortized over 30 years with 5 year balloon. Principal and interest payments for less cash flow, but at least I'm building some equity.

Thank you

[Tom S.]

@Ken Nyczaj Option 2, both for the principal paydown and the 5 year term. If you're not owner occupying it, be prepared for a 75% LTV loan, so if you're putting down 10% now, be prepared to have the other 15% in order to refi (not factoring in principal paydown or appreciation/depreciation of the property).

Separate from the seller finance, make sure the rental numbers make sense. Also recommend getting it appraised so you're not overpaying.

Good luck!