The Basics

What seller financing actually means

Seller financing — sometimes called an installment sale, owner financing, or a purchase money mortgage — is when the seller acts as the lender instead of a bank. Instead of receiving the full purchase price at closing, the seller receives a down payment from the buyer and then collects monthly payments (principal plus interest) over an agreed-upon term.

The park transfers to the buyer at closing. The seller holds a promissory note — a legally binding promise to pay — secured by a deed of trust or mortgage on the property. If the buyer stops making payments, the seller has the right to foreclose, just as a bank would.

This is not an informal arrangement. A properly structured seller carry note is a real financial instrument with real legal protections. Done correctly, it's one of the most powerful tools available to both sides of an RV park transaction.

The common misconception: Most sellers think of owner financing as something you do when the buyer can't get a bank loan — a sign of desperation or weakness. In reality, the most sophisticated sellers often prefer it because the total return is higher, the tax bill is lower, and the monthly income is predictable. Many sellers who could take all cash choose not to.

Why Sellers Do This

Three ways seller financing puts more money in your pocket

The math on seller financing is more compelling than most owners realize. Here's what actually happens to your bottom line when you carry the note versus taking cash.

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You earn interest income for years

At 6.5% on a $1.5M note, you're collecting $97,500 in interest in year one alone. Over 10 years, that's $500,000 to $700,000 in interest income on top of the principal — money you'd never see in an all-cash sale.

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You spread the capital gains tax bill

Instead of paying tax on the full gain in the year of sale, you recognize gain proportionally each year as payments come in. This can drop your effective rate from 23.8% to 15% — a difference of $115,000 or more on a typical park sale.

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You can command a higher sale price

Offering seller financing expands your buyer pool significantly. More buyers means more competition. Sellers who offer terms consistently get higher prices than those demanding all-cash — because buyers are paying for the access, not just the asset.

The all-cash vs. seller carry comparison — real numbers

Take a $1.8M park with a $1.2M gain. Here's what each path actually produces for the seller over 10 years.

What you're comparing
All-cash sale
Seller carry (6.5%, 10yr)
Difference
Sale price
$1,800,000
$1,900,000
+$100,000
Down payment received at close
$1,800,000
$270,000 (15%)
Federal cap gains tax (est.)
($251,600)
($135,000)
+$116,600 saved
Interest income over 10 years
$0
+$673,000
+$673,000
Tax on interest income (37%)
$0
($249,010)
Total net received over 10 years
~$1,548,400
~$1,958,990
+$410,590
Over $400,000 more on the same park. That gap comes from three sources: slightly higher sale price, significantly lower tax, and interest income that all-cash sellers simply never see. The seller who holds the note ends up better off in nearly every scenario where they don't urgently need the lump sum.

The Deal Terms

How to structure a seller carry note

There's no standard template — every deal is negotiated. But there are established norms that most seller-financed RV park deals fall within. Here's what each term means and where they typically land.

Term and what it controls
Down payment 10% – 30%
Interest rate 5.5% – 8%
Amortization period 20 – 30 years
Balloon payment due 5 – 15 years
Prepayment penalty Negotiable
Security Deed of trust / mortgage
What each term actually means
Higher down payments mean less risk for the seller. 20% or more is a comfortable starting point. Below 10% should trigger additional protections.
Seller carry rates are typically below bank rates — the buyer is rewarding you for convenience. 6.5% is common in the current market.
Longer amortization means lower monthly payments for the buyer, making the deal easier to service. Most sellers use 25-year amortization.
The balloon forces refinancing or payoff at a set date. A 7-year balloon is common — gives the buyer time to stabilize the park and refinance with a bank.

Interest-only periods — when they make sense

Some sellers agree to interest-only payments for the first 2 to 3 years. This dramatically reduces the buyer's cash drain during the transition period when they're learning the park and potentially making improvements. For the seller, interest-only means higher monthly payments (no principal reduction) and a larger balloon at the end. It's a reasonable concession for a buyer who needs breathing room and has a credible plan to generate the cash flow needed to service the full amortized payment later.

Subordinate seller notes — when a bank is also involved

Sometimes a buyer brings a bank first mortgage covering 50 to 60% of the purchase price, and the seller carries a second note for an additional 20 to 30%. This structure lets the buyer put less cash down while giving the bank sufficient collateral. The seller's second note is subordinate to the bank's first position — meaning in a foreclosure, the bank gets paid first. This adds risk for the seller and warrants a slightly higher interest rate on the second note to compensate.

Always use an attorney. A seller carry note is a legal document that will be relied upon if the buyer defaults. Don't use a template from the internet. Hire a real estate attorney in the state where the property is located to draft your promissory note, deed of trust, and loan agreement. The cost is typically $1,500 to $3,500 and it's the most important money you'll spend in the transaction.