Hard times trying to wrap my head around payment schedule options

[Chris Luksha]

Hi All,

Thanks again to all the great contributors here on BP.  I am still sucking in info but really need to jump in with action.  To that end I am looking at a potential duplex purchase using private money to fund the downpayment while using a 75% purchase and rehab loan from my local credit union.

I would like to ask a friend to fund $25k for the downpayment combined with a $75k, 25 year purchase & rehab loan at 5.5%. (Total purchase $100k Including $55 purchase and $35 rehab on a potential ARV of $160k)

The options I was thinking of that could benefit both my friend and me in the deal are:

1. Loan the $25k based solely on an 8% balloon payoff in 12-14 months after refinancing. This of course depends solely on the bank or credit union agreeing to refinance once the property has been rehabbed and lived in for 6 months.
2. Loan $27k interest only payments for 14 months at 8% interest. Again - same success or failure based on banks refinance.
3. Loan $25k at 6% for 10 year term, monthly P&I plus 25% of the cash flow for same term.

I have four questions

The first question I have is:  Does anyone think these are outrageous in one direction or another? e.g. Am I stiffing my friend or stiffing myself? Or does one or the other seem reasonable.

The second question I have is: How in the world do I calculate the balloon payment on number 1?  I have looked around for an online calculator but could not find what I was looking for.

The third question is:  What do you base amortization on an interest only or balloon payment short term loan? I keep hearing people on BP refer to taking an interest only loan for 14 months or a balloon payment loan for 12 or 14 months at n%.  What is the n% based on?  Is it on 12 months? 30 years? etc. If you are basing it on 12 months but the lender is amicable to going an extra six months because you need to, how did that extra six months get calculated into the initial 12 month amortization? Maybe this one should be a post in and of itself ;)

The forth question is: What would be the best way to calculate the third option? To date I have created two rental reports on the BP Rental Property Calculator, one for $25k and one for $75k, then I simply took all the expenses from one report, and manually added the P&I from the other report in order to come up with the true monthly expenses.  Is there a BP calc that I am missing that will allow me to put in two mortgages?

Thanks all!

God Bless,

Chris