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I have a vacation home that I am trying to sell in a still pretty depressed area. I have had several people interested, but they can't get bank financing. I am thinking of doing a "land sale" where I hold the deed and the mortgage, with a balloon in 2 years. I get a decent rate (8%) and a 10% down payment, if they blow the payments I get the house back and keep any money paid. If they can't get a loan after 2 years, my default rate goes to 12%.

Does anyone have any experience with this? Not sure if I can claim the interest money as rent and depreciate the house or do I have to claim it all as interest income for tax purposes?

Thanks for any thoughts on this.

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