40-Year Seller Financing: Yea or Nay

[Nathan McBride]

I’m looking at a piece of property in an area that could be a great opportunity to ride a wave of appreciation as others around it are being renovated.  It's currently mixed use and is basically as close to the major university as you can get.  It also comes with an extra lot, which makes this one of the few properties with adequate parking in the area.

The problem is the seller knows what he has, and is not super motivated to sell. It looks like it will not be possible to reach a deal with bank financing that will meet my cash on cash ROI requirements.

He has, however, given me indication that he would be open to seller financing, even saying he's done a 40-year note with someone on a different property.

I don't know if a 40-yr amortization is in play on this property, but before exploring it with the seller, I wanted to gauge the feelings of folks here.

What are everyone's thoughts on going to a 35 or even 40-year note to force cash flow?  I would absolutely not accept a prepayment penalty, and crazy a high interest rate is out of the question because of cash flow constraints.

It seems to me that it is an opportunity to take advantage of cash flow as I allow the property to appreciate or even do some light improvements to force appreciation.  If the area redevelopment never materializes, at least I still have my cash flow.  Am I missing something?

TLDR:  Is a 40-year note a good idea, assuming no prepayment penalty and reasonable interest rate?