I wish I had offered more as it is now on the market at $5m more than my offer (my offer match the appraised value and was all I could afford at the time - I think they are about $1m over priced, but it is a unique property). 

Mine is 7 year draw period then 7 year repay period.It would probably make the most sense to try to BRRRR with the HELOC vs using it as a down payment for a buy and hold rental with the goal to pay the HELOC balance when you refinance but depending on the property the cashflow would still make sense to go buy and hold.

Generally, using leverage to buy anything will increase risk, but RE is pretty unique in that using leverage is standard practice due to it's relative stability.

If Niami can’t repay the loan within three months, a trustee for Hankey will schedule a trustee’s sale approximately 21 days thereafter.

It’s the most unique place I’ve ever lived in.

Either way, there most likely is not a penalty for repaying the seller or person holding the note before the end of the loan term.

Since I funded the LLC the seed money for the property, is there any advantage to having an interest rate for the repayment of the loan?

Hello,I have the opportunity to purchase a unique property, it has a single family house 2/1 to the front of the lot and a separate duplex (1/1 each) to the rear of the lot.Initially I was beaten out of the deal but they then had trouble getting financing due to there being two separate dwellings on the property and I am back in the running. 

I can loan them the downpayment money and gift them a portion of its repayment each year until it is diminished.

Assuming you did it just in case you should have the funds just repay it.