Tax on Principle or interest from recent pod cast

[Micah Shelton]

In a recent pod cast the interviewee stated he lowers the interest on his loans from sellers and increases the price, or shortens the term so as to increase the principle payment. This made it so the seller paid less in tax due to interest being taxed at a higher rate than the principle.

Would the same be true of private money lenders on investment property purchases?

I have been buying mid-west properties using investor funds at 6-8% amortized over a 30 year period. These are high cash flowing properties that may need some work to stabilize but will appreciate as well over time

If I buy a place for 100k at 6% I am paying $30,0000 in interest over a 5 year term. (amortized at 30 years)

But, if reduced to 3%  but borrow $130,000 Im paying $19,500 in interest over 5 years...Then I have to pay back the $150,000 netting the investor $50,000 equity profit he/she would have to pay tax on as long term capital gains...and the $19.5 in interest taxed over that five years.  They make more over the purchase of the property, I get an additional 30k for renovations and cheap money.

Just trying to make sure Im thinking of this straight before presenting it on the next purchase.