Land Contract Deal - Need Advice

[Ben Johnson]

I'm trying to close my first deal. I've found a seller who is willing to finance the loan and work with me on terms using a land contract.

Wondering if I should pull the trigger. Any input appreciated.

Here's the deal:

Santa Clarita/Southern California

Purchase price: $799k (that's about market rate--maybe a touch higher, but with a small amount of work could build equity of about $20k higher than asking)

Down payment: 5% payable over the first 6-8 months (he's looking for about $35k, but might take less, and won't require it up front)

Interest Rate: 4.25 (on the high side of current rates)

Term: He's flexible and has indicated that he will go out to 40 years. That's necessary for me to make the property cash flow.

Essentially, I think I can find renters that would allow me to cashflow about $100/month after expenses if I do a 40 year term. Market rate for renters appears to be about $3,600/month.

Idea is to keep the seller financing in place until I get 20% equity and then refinance. But, will take 10-12 years to get there on a 40 year term depending on appreciation during that time. 

Seems like a good deal to me, but what do I know? I'm basically paying market rate for the property, but if it cash flows, does that matter as much? Would you take the term out longer than 40 years if he would agree?

Also, he's just redone the kitchen and all the bathrooms.