Interest only, long term, and a portfolio of properties.

[Robert A.]

Hey BP, 

I'm talking with a seller who owns 28 units/10 properties (C--) in a 2 square mile radius of Columbia, SC. He has proposed seller financing, 10% down, interest only with a 10yr call. Still in the early stages, with nothing finalized. 

I originally cherrypicked 12 units at 450,000 contingent on any outstanding repairs needed . All units are occupied at 550, some on month to month. Lower income area, but I believe under market rents by 50-100.

 The other 16 are in rougher shape and area if I'm being honest. 450 month to month. These could be raised to 500, or more if I go section 8. Slight deferred maintenance.  Bringing total to around 700-750k purchase. Adding another 70 for rehab/reserves. According to my numbers, and given the sellers rough expenses... I'm at ~9,500 monthy expenses , and in a perfect world 13,800 gross rental income a month.

 I'm really thinking of adding these to the mix because hey, 16 extra units would get me right at my freedom number after my partners 50/50 split. If im going big on my first investment, might as well up the ante.

Interest rate TBD, but hes not really interested in making a killing every month (his words). He's more interested in deferring taxes as much as he can for his family down the road. Great guy, very reasonable, and one of the reasons why I love real estate, building relationships. Anyway 4-6% interest only would give me a healthy cashflow, range of 33% to 24% COC with no value added, just maintaining. Bringing up to market rents will skyrocket value and return.

Now, the risks. I'm purely after cashflow. Equity means very little to me, but I will have some as I'm buying under market. 10 years is a long time, I don't forsee that area becoming deserted or a warzone, but honestly who knows what the local market or banks will be like. 

My exit strategies would be refi into a commercial loan, perhaps release some properties from the note to refinance into 30yr, renegotiate with the seller for different terms or, what I really hope happens... have thousands of units in my portfolio and pay it off with ease!

Any insight would be greatly appreciated. My massive action may be paying off, but It could be a nightmare.

tl,dr:  lower interest only, longer term seller financed portfolio in C-- area, what would you do?