What is a FAIR, but GOOD DEAL with seller financing?

[Taylor Ferrell]

What does a FAIR but GOOD DEAL with seller financing look like in today’s economy?

In the past I have used conventional financing for purchasing investment properties, and would appreciate any guidance from those that have done seller financed deals. While I understand that just about any terms “can be negotiated”, I am trying to get a good sense of what a realistic and fair deal to both parties would look like today.

Scenario: A local 80-year-old real estate investor is looking to retire, and is starting to sell off properties. He recently sold one in January to a local flipper (not me) for $166,000. The flipper put in $25,000 to get it rent ready and sold it for asking price of $250,000, on day one. The market rent for these properties is around $1250 per side.

He has sold off almost all of his portfolio over the last 4 years, but still holds four more duplexes. I would be interested in purchasing three of them that are in the same neighborhood as the above mentioned property. While the seller is ready to retire from being a self-managed landlord, he is not sure he wants to sell them yet because he still likes getting some monthly income, and wants to spread out his taxes. These units are currently being rented for $700-$800 each, but comps support $1250.

I am trying to determine if there is a potential deal I can take to the seller utilizing seller-financing that accomplishes his goals, and is still a good investment. I am looking to buy and hold, but am happy to refinance to conventional loans as he is ready.

Paying him close to what he makes a month in rent off each unit as the “mortgage” does not leave enough to cover expenses (capex, vacancy, taxes, insurance, etc.) and still have any real cash flow, so I have eliminated that as an option.

I appreciate anyone’s insight on how I might could structure this. Alternatively, do you think the best option is to just wait until he is ready to sell them, and purchase each of them one at a time over the next couple of years? 

Even if you think the best option is to wait, I would still love to get your feed back on what is "standard" in today's economy for seller financing.