Here’s a couple links to get you started:Applicable Federal Rate (AFR) DefinitionThe tax-smart way to loan money to family membersThose links will just give you a basic understanding of what it is, but double check with your tax professional to be sure if/how it might apply in your specific situation so you or your friend don’t get hit with any unexpected surprises later on. 

If this is the case, I'm surprised banks would ever lend on cliff-side mansions in California. 

So I'm not surprised he "isn't optomistic". 

I would venture to guess a fixed rate product would be better, no prepayment penalty, less chance for the "chef surprise" down the road.

If the property manager allows it (I'm actually surprised they do) I'd be all for it myself.

That is rare and I’m still surprised they’re willing to go for it.

They are also super prompt with getting renewals and leases signed which is surprisingly not the case everywhere. 

I'm not an insurance guy and so do not know all the details (maybe one can chime in), but I've seen insurance policies that purport to cover up to $10k or $20k (or w/e) in "surprise" special assessments.

I was pretty surprised with his estimate as well, but he had pretty good evidence: someone bought the same floorplan in the same development for 9% higher this year. 

Hey @Rick Martin Lots to learn...we just did an 11-yr analysis of the Columbus MF market...probably the first ever and were a bit surprised about the outcomes on some of these neighborhoods...there is a lot going on in the city right now, but getting your feet on the ground is by far the best approach.