Should I buy a San Fran Triplex w/ seller financing?

[Grant Villeneuve]

Hi BP community! 

I need some investing advice as my fiance and I are having trouble coming to a decision on whether to buy a SF 3 unit w/ seller financing or not.  We are both pretty green about what a good seller financing structure would look like.  

The details: 

Off market 3 Unit: Asking price $2.3M 

-Top Unit Vacant (rental value $5,500)

-Middle Unit Tenant Occupied ($2,100) 50% below market

-Bottom Unit Vacant (rental value $2,200 after 50K rehab). 

NOI: $78,371 ($6,531/m)

Cap rate: 3.4% GRM 19.4

-Seller is "motivated" and has offered seller financing with two Scenarios:

Option one: 

$2.3M Selling Price

$390K down (17%)

Balance of $1.9M at 1% interest w/ a 30 yr Amort. w/ a 5 year call (30/5) in the first year ($6,140/mo. plus taxes & insurance.)

Then 2% interest w/ a 30/4 ($7,056/mo + T&I)

Then 3% interest w/ a 30/3 ($8,048/mo + T&I)

Then 4% interest w/ a 30/2 ($9,114/mo+T&I)

Then 5% interest w/ a 30/1 ($10,248/mo +T&I)

At the end of the five years, the owner would the option to refinance the property with a loan institution of their choice, or negotiate another 5 years with seller at a renegotiated interest rate.  

Option Two:

$2.3M Selling price

$299K down (13%)

Balance of $2M at a fixed interest rate of 3% w a 30 year amort. and a 5 yr. call

($8,436/mo payment plus T&I)

My initial curiosities are:

-Out of the two options, which one makes more sense?

-If there was a third option, what would be appropriate?

-What would be an appropriate "call" period?

-Once owned for 5 yrs, would it be easy to refi out w/ a fanny may/freddie mac based primarily on the asset and not other income/ W2?