Newbie here. Just using this as a learning opportunity by analyzing the terms.
Can someone critique my analysis? I just got done reading John Schaub’s books but trying to understand the game better before I buy. The financing part makes my head spin at times.
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Down payment seems excellent. Will allow for greater ROI annually.
Interest rate: Seems pretty high but less than 10% Seeing as down payment is ~1% it seems acceptable. I’d probably negotiate lower if possible?
9 year term also seems acceptable since it should cover an entire lap of the credit cycle. He can refinance at any point when rates come down, no? And still benefit from a higher ROI those first years.
Interest only payments - As I understand it you want interest only payments when financing from a seller. Paying off the principle puts that money in equity that you won’t see again until you sell. Thus effectively being unusable money. (schaub states this but I admit the idea of not paying the principle kinda rubs me the wrong way - can anyone elaborate?)
The balloon payment seems sucky but perhaps you can negotiate an exit strategy for this if rates are higher than the agreed upon rate?
