Owner Finance Deal??

[Brian Mackey]

Looking to purchase my first Fourplex through seller financing.  The property is in an older well established part of town, Garden District, and the owner wants to strictly Owner Finance the deal.  The property is actually an up and down duplex, with two apartment type studio apartments in the back.  The area is looking to appreciate with new bars/restaurants/roads/etc. Here are the numbers:

Asking Price: 400k

Rental Income: 

1) 900 2 bed 1 bath 1000Sqft, 

2) 900 2 bed 1 bath 1000Sqft, 

3) 500 Studio 500Sqft, 

4) 500 Studio 800Sqft 

Total Rent- $2800

In reading the information about the place and talking to the agent, I see that the owner (80 years old) wants the length of the deal to last 5 years.  My assumption is that we would work out a deal that looks something like this:

Purchase Price - 400k

Down Payment - 0-5%

Interest - 2-4%

Amortization at least 15 - 25 years

5 Year Balloon

I'm thinking that she would want to at least get something close to what she is getting monthly but I would like to settle around a 1500$ a month payment to her, because after taxes, insurance, cap ex, etc. I still want to make close to 200 a door.  I believe I can force the appreciation through very simple renovations as well, so that I could eventually get close to an average of 400-600 a door, there is a lot of opportunity for improvement.

What are your thoughts on a deal like this?  Is a 5 year balloon too crazy?  It sounds scary.  I know I can refinance into a traditional loan eventually but I've never experienced it so it just all makes me a little nervous.  I've already got a duplex and want to continue the path, and I know seller financing is a big way to do it.  Just need some advice.