Family Help with Down Payment - Terms

[John Johnson]

Hi All,

My wife and I just found an amazing deal.  We've been scouring deals for ~2 years now and this is the first one that meets my personal requirements (ie. cash flow >$100/mo/unit and 4 units).  However, my wife and I are short on funds.  We talked to my wife's father and he's willing to pay the down payment for us, but he wants a return on his money equal/better than he can get with his dividends in the stock market (~4%).  If we give him the 4-4.5% return, he's excited because it diversifies his retirement portfolio, as he's just in stocks today.

What is everyone's thoughts on how to structure this deal with my father in law?  I'm thinking pay him ~$200-$300/mo for 10years, then do a cash out refinance at year 10 to pay him the balance (based on a 4% interest rate). Does this sound reasonable?  Or is there a better way to structure it?  

The other piece, which is sort of a bummer, is that we will need to pay him back more, to account for the taxes he has to pay when he takes the money from his retirement account (he's retirement age).  I think that's a small price to pay to get such a good property.

Thanks!!