Purchase neighbor's home in LA

[Charles Choe]

Hi,

My retired neighbor recently told me that he wants to sell his 50 years old, 1300 SF 3/1 house for around $400,000. The house located in nice South East Whittier, CA area bordering Fullerton / La Mirada / La Habra. It is in pretty good condition and he is the original owner. The comp is about $450,000 in this area. The estimated rent is $2,200. 

I am interested in purchasing this property for buy and hold investment even thought it has a slight cash flow. I don't really have a cash set aside for investing. I am can't afford FHA loan since PMI will be will around $350 and it will destroy my cash flow. I have 2 other rental properties with about $200,000 in equity, but I don't think cash out refi is an option.

What do you guys think? Is there a way to arrange a private deal with the retiree and pay him back directly over time if he agrees? or what kind of creative financing would you recommend?

If it doesn't work out for me, I was going to have my friend purchase it as a primary residence. Thanks for your advice in advance!