No money down seller financing, but negative cash flow

[Logan Rand]

Hey everyone,

A family friend is a real estate investor who has decided to begin selling his portfolio of rental properties via seller financing. While many of his tenants have taken him up on the offer, he still has many properties that the tenants have declined to purchase. Instead he's offered me the chance to purchase them from him via seller financing. The properties are around $100k, and he is offering to sell with a 5% mortgage with no money down.

The issue is that many of the long-term tenants (in some cases over 20 years) pay well below market rent, such that the rent would only cover the cost of the mortgage. Now obviously over time I could raise the rents incrementally, but after accounting for taxes, insurance, management and withholdings, the cash flow would be negative for the first few years.

The properties are in good condition, so no rehab will be necessary. Of course I could raise the rents all the way to market levels once the current lease expires, but that seems like a poor way to realize an investment (all but ensuring the tenants would need to move out). Its a great opportunity to buy my first property with nothing down, and at market rents the deal would be very solid, but obviously the property would not cash flow for multiple years. 

Interested if anyone else has come across a similar situation or would have a creative solution.