Would you do this deal and how would you plan for a 5 yr balloon?

[Stanci March]

I'm looking at a package of 3 "class A" mixed-use properties with 14 doors total (13 apartments, 1 retail). The properties are downtown historical residential loft buildings with street-level retail (two of which have been converted to only residential). The properties looks to be in immaculate condition with very solid mechanicals, and the majority of tenants are military officers, who take very good care of their units and are easier than most populations to manage. Turnover generally happens annually, but is at regular and expected intervals and the properties rent quickly.   

On the surface the numbers look great to me but I've only bought SFHs before, so wondering if there is anything I may not be considering that is more unique to commercial deals. Here it is by the numbers:

Sales price for all three - $650,000

Current monthly gross - $9,866 - historical gross over the past 10 years has averaged $13,000 monthly.

I'm told that 3 tenants who were contractors, all had their contracts cancelled unexpectedly which is the reason for the drop in gross this year, but that is the first time anything like that has happened since the seller bought and rehabbed the buildings in 2005. 

The current and historical numbers meet most if not all of the metrics I use for SFH investments (1% rule, 50% rule, desirable tenants, historically appreciating area), so from that standpoint I'm itching to pull the trigger.

The kicker may be the financing. Seller is offering to owner finance with as little as $40,000 down (which I will use a private lender for @5%), at 5% on a 20 yr amort schedule, with a 5 year balloon. I will need to find another source of financing at that point. At the time the balloon is due, I will have $104,000 in equity assuming 0% appreciation. At current vacancy rates ($9,866 monthly gross) I will not likely have additional cash flow built up to add equity, so my equity of $104k would be short of the $130k (20% of $650k) needed to refinance with a traditional lender. At the historically 0% vacancy rates ($13,000 monthly gross) I would have an additional $104,000 in cash flow built up in five years, that when combined with the equity acquired through mortgage payments would equal $208,000, putting me well over the $130k/20% traditional lender mark.

Am I thinking about this the right way? What sort of terms should I expect from a traditional lender after the balloon comes due? I'm concerned that they may want more than 20% equity, or that they may not assess the value of the properties as high as I would need, or burn me on the interest and leave me scrambling for cash or a buyer.  

Sorry for the long post...thought it better to lay it all out in one place. Any thoughts, advice, or ideas would be greatly appreciated. Thanks in advance BP Community!