When it comes to managing your mortgage, most homeowners are familiar with refinancing as a way to lower monthly payments or take advantage of better interest rates.

(Anything that isn’t your primwry first is only tax free on a pro-rated basis.)I don’t know how you could swing it but…If they gifted you the kand they would avoid their capital gains tax.

With the exception of building a trailer on the property (these are hard to finance), this sounds like a good plan AND if you are using it for your business AND your business pays more than 50% of the rent (if you have more than 1 tenant), then this is a more financeable property in the eyes of banks and credit unions as it would be consider a commercial "owner-occupied" property. 

I am looking for recommendations for best financing options.The owner is considering financing it, but until they agree, I am planning as if they will not do so.The local credit union I use, who is very investor friendly, is unable to lend on properties larger than 4 units right now. 

If they have a good interest rate it might be worth looking to see if you could assume their loan to take advantage of the lower rate.  

The only issue is the interest rate is 7.125%.

Im self employed, roughly make $130k gross anually, 1099 NEC , no debt at all, 740 credit score. 

Yes, that means he will have to give up his 3.5% rate (or whatever it is assuming lower then today rates) but it is what it is. 

If so what are the interest rates on those debts?

I have over 30k coming in very soon and working on credit score.