Is structuring this deal with a HELOC the best approach?

[Account Closed]

I have a 73 year old seller of a property in a hot are of Charlotte who is interested more in the tax implications of this deal than maximizing his profits.  His most important aspect to make sure he doesn't go into the next tax bracket.  He is willing to do some owner financing, but it has to be a little unique.  This is a buy and hold property for us and we have to dump some money into modernizing it to maximize our rental income.  This will not cash flow well (if at all really) until the terms of this deal are finalized.

Here are the numbers

Selling Price: $175k

Actual Price: $200k (this is what he was about to list it for)

ARV: $240k (this has been checked with local comps. Area is appreciating quite rapidly but doesn't factor into this deal).

Repairs: $20k (my crew)

There is instant equity on a keeper house.

Seller is willing to finance this deal over a 3 year period.  He is asking for the following.

• $10k up front
• $1k per month
• $50k per year in a lump payment
• 0% interest
• Remainder of balance in Month 37 (around $19k, I don't feel like figuring it all out for this post as of yet)

I think a HELOC is the best way to approach this. It all but guarantees the money will be available when the $50k payments are due. It also allows us to only pay interest on the money we actually need versus getting a mortgage up front and holding onto the money.

Concerns:

I want to protect his position as much as possible without putting a lean on this property that would prevent me from getting the HELOC I need.

Possible Proposal:

Assuming he requires this be secure, I can put the lean on another property or properties to protect his position. I have 3 homes I own outright and 4th that has about $160k or so equity. This would allow me to get the HELOC and make the payments to him on time.

Is this the best solution?  Is there another more appropriate solution?  Has anyone structured a deal like this before?  We are going to purchase this house, I am just looking for the best way to protect the seller and ensure I can meet my obligations when the larger payments are due.  I currently have about $35k-$40k, but we are rehabbing a house and expect to close on another deal that will require rehabbing as well so I want to minimize my up front costs as much as possible. 

Thanks for taking the time to read and respond to this.