interest on seller financing

[Jarred DeArmas]

Hey guys, 

So I am trying to figure out seller financing and interest rates, and I'm having trouble with the interest part. I am not trying to figure out at what rate one should charge or pay interest, but more along the lines of how that interest is accrued.

Is the interest on a seller finance deal typically based on an APR or a flat rate for the amount carried??

example: If I was to purchase a house for $500,000 and the seller carried the whole amount at 10% for 30 years, that would end up equaling a total to the seller of $550,000 to the seller. However, if that was 10% APR the seller would probably almost double their money. I guess no one would pay 10% a year and keep that loan for 30 years tho..

Can you guys help me get this straightened out? 

thanks 

[Jeff Filali]

I sell some of my flips with Seller Financing and always try to get 20% down and charge 10.0% APR, usually on a 10 year note with no pre-payment penalty, but have negotiated on the down payment amount a few times but not the interest rate. From my view of it, I can make more then that not having the money tied up and am doing them a favor. If the buyer has good enough credit to negotiate a better rate, they don't need seller financing. My guess is it will be difficult to find anyone willing to offer seller financing below around 6-7% APR especially if they know you're going to use it as an investment property.