Investor Needing Advice On Seller Financing Opportunity

[Eugene Rogachevsky]

Hello All,

This is a question regarding seller financing. The property is located in California. 

My uncle would like to sell his property and do seller-financing. I would like to purchase this property from him. I have never purchased a property utilizing a seller-financing strategy. 

Details:

1. He owns the property free and clear

2. He wants to avoid paying capital gains

3. He would like to sell for $205k with a 5-7 year term 

4. According to him, I can "make the numbers work for me (investor)" and then we will decide whether it makes sense to move forward 

     a. This implies we can do X% down, Y% interest; as long as it makes sense from my standpoint I can pretty much dictate terms.

My questions are....

1. Given the aforementioned information, what would constitute good terms so it's a "win-win" for both of us. 

2. Do I include the Taxes and Insurance (that he's currently paying?) in the total payments and he just makes the payments for those items when they're due? 

    a. Or do I get insurance in my name? 

    b. Will the taxes be sent to me from now on? 

c. There is an HOA. Who is responsible for making those payments?

3. What is best from my perspective and why?

    a. Interest only payments?

    b. Principal only payments?

    c. Principal and Interest payments? 

4. Let's say as an example I propose $205,000 purchase with 5k down and 5% interest with a 7 year balloon. P&I is around $1075 (Taxes and Insurance = $225). At the end of 7 years I would have a Principal reduction of around 21k (as en estimate). When the balloon payment is due to him, do I only have to pay him 179k? 

(Current rent is 950--market rent is 1400; I will do a renovation (20-25k) and rent to corporate tenants (e.g. travel nurses) for 2200-2500).     

Thank you in advance. 

Eugene