Interest Free Seller Financing

[Francis Nasser]

Hi! I've attended several bootcamps where people discuss interest free seller financing, however I've read in many places that an interest free loan isn't legal and that interest must always be included in the loan. I would like to get input from anyone that's actually closed on an interest free seller financing deal or someone who knows about the topic who can confirm if this can in fact be done. 

Thank you!!

[Sanat Bhandari]

@Francis Nasser A CPA can chime in on this one but as far as I know, an interest-free loan isn't illegal per se but it is highly likely to trigger an IRS audit

However, you could include a certain $ amount as a part of the purchase price and record it on paper as prepaid interest which could potentially circumvent this issue 

E.g, a seller is carrying $100,000 for a property with a 2% interest on 30 year am and a 5 year balloon (=10%). You could either do this or bump up the purchase price to $110,000 with the same am at a 0% interest for 5 years (=0%) so that all your payments are "technically" going to the principal since it's a 0% loan

Any CPAs who can add on to my answer here? 

@Basit Siddiqi