Conventional 20% down or private loan

[Victoria Monahan]

Hello BP members.  I have read every BP article that comes my way and can't get my hands on enough real estate books.  It's been my obsession for the past 2 years.  We recently purchased a 2-family home in NY (long island) and are living in one of the units, renting the other.  We are looking into purchasing our next property and have the following 2 options:

1. purchase 2-family unit with conventional 20% down, investment home 30 year loan...our home budget being about $300K-$350K

2. purchase single family unit (all cash foreclosure buy of about $130k) with an investor under the following conditions: we put down 20%, he gives 80%.  We put the money in to fix up the unit and he helps obtain tenant (section 8 low income housing so potential for tough tenants but semi-guaranteed rent payments from government).  He owns 20+ section 8 properties so I like the idea of having someone to mentor us through the process.  After 6 months grace period, we pay him monthly 1% of the money he has invested.  After 1 year of ownership, we would obtain our own bank mortgage, pay him back his initial investment and the home is ours to rent/sell as we wish.   

I know there are likely so many more details necessary in order to make a decision but I figured I would put it out there and see if anyone had any opinions right off the bat.  Thanks!