Seller financing on a STR condo

[Katie Ann Mangan]

Hello!

My husband and I are under contract for a condo in Gulf shores that we will use as a STR (we close this Thursday).

The seller is also selling the one next to the one we are buying. We used up all our capital and our debt to income ratio on the one we are buying but decided to pitch seller financing for the second one just to see what he would say. It has been on the market for 81 days and seller keeps dropping the price. They are an older couple near retirement and wanted to capitalize on the market and go ahead and get out. He said he would hear our offer in the seller financing piece so I am going to send him an email but I have a few questions.

1) we probably can only offer 0% down with 5-6% interest. I know not a strong offer so we know it’s a long shot but we figured we would shoot our shot. What terms are people giving these days? I’m thinking for a couple close to retirement it is a safer return than the stock market right now so mayyyybe?? Seller is super super nice so that helps and I don’t think he would get mad at a bad offer

2)Balloon payment

-i know that oftentimes there are terms for a balloon payment in 5-7 years. My question is about the tax advantages here, I know one of the main tax advantages for seller financing is not to receive a big lump sum payment to not have to pay capital gains tax but wouldn’t they just be putting that off 5-7 years with a balloon payment system? I understand the loan will be paid down some in this time but if you are doing payments based on a 30 year loan, it would not make that much of difference.

-for balloon payment, will it be difficult for us to refinance if we aren’t able to force a lot of equity? There will be some- the kitchen could us some updates but not a huge amount.

Thanks!!!