Interest Only Seller Financing

[Jeff Montanya]

Can anybody help me understand how to structure and use an interest only loan to acquire a potential free and clear seller finance deal. The seller is willing to take 5% over 10 years. I’m trying to negotiate him to longer terms. The goal would be to wrap the note to end buyer but not sure how or if I could refi the underlying debt when there will be no principal reduction and he is wanting market value. Seller knows that if he reduces price then potentially he won’t make his full asking price if it’s sold within a few years. Hope I’m making sense here. Thanks in advance!! #nosuchthingasadumbquestion 🤘

[John K.]

@Jeff Montanya

As far a structuring the note, you will definitely want to hire an attorney to help you draw the papers. This is not an arena you want to trust to some random downloaded form off the internet. 

As far as the terms, I have to ask why would would want to refi out of a I/O note, to get into a full P&I note. Unless the purchase price makes the payment too high to perform on the back end, there is no way I would give up those terms. The fact you will only be paying interest for 10 years, if you wrap that note to a buyer, you should be producing some serious cash flow.