With current rents and purchase price, it has a cap rate of 8%.

Hello,I live in a pretty hot market, with very low vacancy rates and high property demand. 

My goal: create an interest-free loan which is appealing to a potential homebuyer, yet doesn't make too big of a discount on my end.For example: If I sold my $300,000 house with 20% down ($60,000) over 30 years, at 6.7% interest rate: $1548.67 principal and interest per month1548.67 x 12 x 30 = $557,521.20What I would do would offer a lower monthly payment and no usury, but it would effectively be like a prepayment penalty.Arbitrarily, let's say 20% off the monthly payment, or $309.73 less per month: $1238.94 monthly payment.House would be sold at $446,018.40, which is $111,502.8 less than the total paid with a normal mortgage, but $116,018 more than the market price.

Banks and CU have something called "High Cost" rules which means a mortgage under $75K generally is not large enough to include or finance their hard costs plus fee's.Some DSCR lenders offer a $75K minimum after down payment but rates are usually above 9.75% even with good credit and carry a 2-3 year prepayment penalty. 

I think the general consensus with todays rates and prices is that cash flow is not that amazing in any market. 

And we live in CA so our tax rates are high.

In my experience, the best rates and terms for home equity products are from credit unions.

Interest rates are really high compared to those of recent years.

Even at a conservative 8% cap rate the building is worth around $1.625M.

To me it feels like most neighborhoods here are dilapidated, cheap with little demand.