Advice on buying a seller financed property

[John Humphries]

Hi BP community.  I'm looking for some advice on an offer for a buy and hold rental property that I am looking at. It is a single family house in a coastal community in NC. 

The backstory: I'm from NC but live on Vancouver Island now. My market here is not conducive to buy and hold and rentals, although I did manage to scoop up a decent deal a few years ago. I'm looking for monthly cashflow to replace my income so I've expanded my search radius in order to keep my investment goals alive. My mother still lives in NC so I decided to look at some real estate there on a recent visit. The house in question is actually the house across the street from her so obviously, it takes a bit of the worry out of buying out of country for me. 

The house is listed for $163,000, but it is a DR Horton cookie cutter style neighborhood with 5 other similarly priced houses for sale in the immediate neighborhood.  The subdivision is still being expanded with new houses being built from around $190,000.  The house in question needs no work, other than having a HVAC which will need to be replaced within a few years. It would likely sell in the $145,000 - 150 range easily, but has been sitting on the market for over 2 months at its current price.

Buying this house at list price or even below list with 20% down and a conventional mortgage (for an investment property) does not make sense based on the numbers that I am looking for (~10% cash on cash with ~$150 in cashflow left over after ALL expenses, ie. mortgage, insurance, taxes, vacancy, management, HOA, etc.). However, I found out that the owner owned it outright and asked about seller financing. They said to make an offer...

Here's where I could use some advice - In order to make my numbers work, I could offer $20,000 down with a 4% loan on $85,000 for a 30 year term. The offer is only for $105,000, but the seller would receive $405 per month for 30 years for a total of $145,500.  For me, I would hit my cash on cash target (10.04%) and would clear $167 per month after all expenses. 

This is a very unlikely offer to be accepted by a seller in my opinion, but obviously it works for me. I don't hold out too much hope that we will be able to come to an agreement that works for both of us, but would really like to make an offer, if for no other reason than learning this process. Can anyone offer any advice on another way to structure this offer or something that I might be missing somewhere? Any advice or comments welcome...

House list price - $163,000

Insurance - $171 per month

Taxes - 74.25 per month

Strata - 160 per month

Rental rate - 1000 - 1200 per month