Should I buy this guest house in Sri Lanka?

[Elizabeth M Williams]

Hi all, I've got a deal I'm considering and would like your advice. We are eyeing a guest house on the beach in Sri Lanka, an island I've been to 5 times now, and which is booming. Here are the details-

The owner is a 69 year old Belgian who wants to sell. And he would love to sell to us.
The villa is over 6000 sf bua, comprising a main villa with staff kitchen, lounge areas, 5 guest suites, outdoor restaurant area, a large veranda overlooking the sea, a pool, and a second villa with staff accommodation and a further 4 guest suites. 

The plot is around 26000 sf, beachfront, great tourist location

The build quality is high, and it survived the tsunami of 2004 intact

The place is fully staffed with a manager who's been there for 19 years, with no intention of leaving

The place is one of the few in the area thats holds groups (the whole complex is rented out to groups of 12-23)

It is currently earning 100k eur per annum with only 50% occupancy (the owner is old and does minimum to market - old website, airbnb, booking.com, homeaway, tripadvisor)

The average occupancy of the area is 74% so there is a lot of room for revenue growth

The rates haven't been raised for 3 years and it is due for a 5% rental increase

The reviews are stellar on all sites, with many repeat clients

The venue is ideal for weddings, reunions, parties, bdays, etc, and the staff handle everything, including an onsite chef

When you stay there it's like having your own resort on the beach to yourself

Owner will act as consultant for up to 1 year for free

So, he wants to sell to my husband and I, as his manager and he really like us and know we would keep the staff and concept the same. He is willing to carry a loan at 0% interest! He doesn't want the taxes on the income. He has a lawyer and accountant in Sri Lanka, and set up a company in Belgium to receive all rental money, so no taxes are owed to the SL govt.
He is asking $900k based on a valuation that was done for a potential buyer (whose financing fell through). But that valuation is based on 74% occupancy, not the current 50%. BUT, it was also done a year and a bit ago and property in that area is seeing 10% appreciation per annum.
I feel like it should be more like $750-800 k but wanted to ask your advice.
We can put $100k down but he is after more like 250k euros.
My question is A- should we buy it B- how can we structure a deal so we put only $100k down (balloon payment in 5 years?) C- what should we pay for it
I spent 90 min on the phone with him yesterday. It is so easy to bring revenues up 20% or more per year. If we paid 800 for it, and put 100 down, at 0% our annual payments would be 70k. Right now its NET earnings are 60-65k, but we are calculating that we should be able to bring the gross to more like $150k minimum (ADR for whole place is $700 and we would bring it to $750, and made assumption of this x 200 days, vs 170 current occupancy). That's still conservative as we should be able to get to 70% occupancy with social media, new website, reaching out to travel agents, wedding planners, retreat organizers, etc. And the operating costs won't increase much as we scale. So in the worst case we'd be at 40% running costs, though he thinks as we scale it would be more like 35% as we wouldn't need to increase staffing.
What do you think?