Land contract

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I live in Ohio. I have a friend that has an opportunity to get a new twinplex built by a friend who is in construction. He has bad credit and is his only real opportunity for finance at the time is land contract. His friend has offered to build at cost and just charge him 1.5% above his lending rate. The cost will be about 10-15% below market value.What are the pitfalls to this situation and what are the advantages? Can he use the tax write off?

 

[HomeGuru]

Your question is too broad.
Interest paid by the Buyer or Vendee can be used for tax purposes as real estate interest expense.
In lieu of him agreeing to pay the developer 1.5% of the interest rate, set the rate in the land contract.
What if the friends rate is 11%, then he will be paying 12.5% interest which is way too high. In addition, the interest rate should be based on permanent financing say a 30 year fixed rather than an interim construction/development loan which has a higher interest rate.