Short Term Rental homeowner financing

[Stephen Scire]

Good day all, I have a good oppurtunity to get into a deal for a STR next door to my current property. It's a close proximity to the ocean...as we are but this unit sleeps more , very much updated ,yields more revenue, better COC return & winterized.... we are in the Maine area...

 The owner is willing to finance with 20% down... I really know these deals don't always come across my lap...& I dont want to mess it up, lol. 

We agreed on a price, traditional financing could be a problem ( or so I think it would be being a single unit but generates good revenue & has value going forward but banks may be requiring 25 - 30 % down )

My question is... WHAT IS A FAIR 30 YEAR INTEREST RATE for both of us, I believe I would put in an option to switch the note over to a traditional institution in 5 years if beneficial.

Thank you all for your knowledge

Steve

[Harrison Smith]

I always offer 0% interest with a slightly higher purchase price. This saves the current owner from paying taxes on interest income and keeps your overall cost down. If they want interest, then I try to stay under 4%. There is value in having the owner carry the loan rather than a bank, where you have all of the closing costs, credit reporting, appraisals, etc. These "off the books" loans are very valuable so I will pay a little more to the owner to make it attractive enough for them to offer it. Refinancing down the road is always an option.