Seller Financing

[Daniel H.]

Looking for more details on offering seller financing with the sale of my property. I would set up the loan to be secured by the property I am selling and if the buyer got behind in payments by a certain amount, I could take back the property correct?

How difficult is that process and how long does it take?

Are the loan payments taxed as income? Will I pay more taxes by seller financing than the capital gains from a straight sale?

[Steven Hamilton II]

Daniel H.,

If your basis in the property is 100k and you are selling 100% finance for 150k. And charging 8% over 30 years. The payment would be: 1100.65

The first year Principal is: 1,253.05 The interest paid was: 11,954.73

Of the principal payments 2/3 is allocated to your basis. 1/3 is gain.

You would recognize 11954.73 as Interest income. You will recognize 417.27 as capital gain income.

-Steven