Am I understanding seller financing? How are my numbers?

[Gurjot Grewal]

Hello BP I have a few newbie questions. 

Most likely this offer won't get accepted, but I think this will be a good tool to learn. Quadplex is listed for 375k on market for about 10 days. I'm going to make one straight offer at 330k and another seller-financed offer at 375k, 6% interest only, 5% down, balloon payment 5 years with no pre-payment penalty.    

-375k x .06 = 22 500 ( is this how I would find my total interest owed? ) Meaning total owed at 5 years is 397,500?

-Would tax and insurance payments be sent to the seller?

-How can I sell this more to the seller. Would they be able to avoid capital gains taxes by going this route? 

-I am using a realtor to make offers, and have not made any seller-financed offers yet. Would this impact how he gets paid? 

[Steve Vaughan]

Quote from @Gurjot Grewal:

Hello BP I have a few newbie questions. 

Most likely this offer won't get accepted, but I think this will be a good tool to learn. Quadplex is listed for 375k on market for about 10 days. I'm going to make one straight offer at 330k and another seller-financed offer at 375k, 6% interest only, 5% down, balloon payment 5 years with no pre-payment penalty.    

-375k x .06 = 22 500 ( is this how I would find my total interest owed? ) Meaning total owed at 5 years is 397,500?

-Would tax and insurance payments be sent to the seller?

-How can I sell this more to the seller. Would they be able to avoid capital gains taxes by going this route? 

-I am using a realtor to make offers, and have not made any seller-financed offers yet. Would this impact how he gets paid? 

 First, I never offer with too many zeroes. Make it specific like it came from your calculator. 

The balance of an interest only stays the same every month. Yeah, you'll pay $22k over the year, but the payment is made monthly, bringing your balance to what you borrowed.  

  I sold 2 large buildings with interest only SF this year, but most sellers will flinch.   The principal pay-down is peanuts anyway, so I wouldn't get too hung up on it or even mention it initially.  

Tax and insurance is paid by the owner, which should be you. Annual pmt to insurance,  bi-annual taxes to the county.   

Your realtor gets paid from your down payment.   If the seller needs 10% down net,  you will put down that plus your realtor.   I've purchased a few dozen with SF and never used an agent. Tired landlords, off-market.