Is This SELLER FINANCE Option Too Good to Pass On?

[Dolev Shemesh]

Hello, 

I'm facing a great dilemma regarding an investment strategy and I'd like to see other investors' opinions/input on this. I'm current real estate investor (not full time) that have about 10 residential- signal family properties. All are doing well. 40% net/annual (about $50k) and 10% COC.

A friend of mine trying to leave the area and sell a commercial property that he owns. It's a unique facility that serves functional activity such as YMCA. It has many tenants such as full size gym, yoga studio, NEW full outdoor area for pickleball, ju-jitsu, and other recreational programs that renting (16 total units - currently 9 are occupied). Other benefits: Located in a growing area, and have a full bar Liquor License and a bar that is currently not occupied (A lot of potential there to sell alcohol). 

But the cherry on top is this: seller is a friend and very motivated to sell, so the terms are 2nd to none: 30yr AMP table @ 4%, and 10 year exit (balloon). If the rent are being kept for our agreement, I'll increase my net income by 173%. 

But now for my concerns:

1) What do I do after the 1st 10 years? Do I have to pay a lump sum or just find another lender with new terms? 

2) It took me a while to build my residential  portfolio, and we all know that residential is far safer investment than commercial (especially now); However this is not an office building and related to leisure and "fun". No Risk No Reward - I know... but a part of this investment will mean that I'll have to liquidate about 60% of my portfolio to come up with the DP. 

3) Insurance right now is at a little over $30k/year, and I expect this to keep on growing. So insurance cost is obviously higher. 

Thanks for reading through and looking forward to hear ANY feedback.