Seller Financing versus Conventional Loan

[Steve Hiltabiddle]

Did some driving for dollars yesterday looking for run-down/abandoned properties. Found more ‘for rent' signs and made some calls to get a sense of rent in the area. Connected with a 76 year old long-time landlord who, after some probing, said he might be interested in selling the duplex in question. Since he was a contractor the property appears to need little work at this time so I crossed off a BRRRR opportunity. While rents seem appropriate, his thought on price is right around 100x total rent. He's owned the property since 1987, while I didn't ask, I am currently assuming it's free and clear of a mortgage.

A few thoughts and I’d welcome some perspective from the BP community:

• Assuming I can obtain a conventional 20-30yr mortgage, is there any reason to consider bringing up seller financing. Why pay 7-8% if I can pay 4.5%? I read Low/No money down by Brandon Turner and couldn’t find an angle it made sense since I could cover 20% down.
• NOI is not yet known to fully evaluate the property, but if there is little to no rehab and property has been well maintained, it seems the value could be negotiated below 100x rent because he'd save on commissions. Other than rehab costs, other negotiation plays?
• Running rental prop estimates on the BP calculator with a 30yr loan including 10% PM fees (which I could handle initially), cap rate is in line with location (6%), 9.3% CoCROI, about $500 cash flow. Numbers look good I think, my concern is tying up a sizeable deposit.

I’m a newbie so putting numbers together for possible first deal is different than just analyzing random properties so any guidance you can share would be welcome.

Thanks

Steve Hiltabiddle