Structuring a Seller Finance Deal

[Albert Velasquez]

Hi BP FAM, *LONG POST INCOMING*

My family and I have the opportunity to buy a primary residence using seller finance. Here is a link to the three different loan terms I came up with. Let me give some context:

Single-Family-Detached 

Purchase Price: $225,000 

Down Payment: 60k-90k 

ARV: $400,000

Rehab Costs: $87,500 +/- $12,500

My family is not able to qualify for conventional financing which is why we're going this route. I won't go into the details on why, but for the next couple of years we will be unable to get financing the conventional way. However, our finances are in top shape, and we can afford a PITI payment of $5,000 a month. We won't have the chance to invest for the next couple of years anyways, so we don't see a problem with throwing all our money at this deal. We still have a solid emergency fund, so this isn't as risky for us as it might look.

My family's ultimate goal is to do a flip-grade renovation of the home, then do a cash-out refi to pull 90-95% of our equity to use for other investments in the future. My parents and I are going to be meeting with the owner in the next couple of weeks to discuss these terms I came up with. The motivation of the owner is simply to make money. They have no emotional ties to the property. They're firm on the purchase price of 225k. The owner mentioned a 12% interest rate, and that he wanted a down payment of 60k. The owner did also tell us that he did not want to hold the note for a long time which is why we have it amortized over 5 years. My plan was to first present the owner with Loan C in red, and if it's not accepted we can either go with Loan B or Loan A, with Loan A being his initial offer. If we compare Loan C (my initial offer) to Loan A (his initial offer), I increased the down payment from 60k to 90k, and in turn decreased the interest rate by 2 points from 12% to 10%. 

I guess my question for y'all is, what do you guys think of this? Are the terms for Loan C (my offer) fair? My thoughts are that with a 60% LTV the loan is less risky, and gives him more cash up front? Another question is if there is any way I could help the seller lower their tax bill? For example, if I gave the down payment over 5 years instead of a lump sum all at the beginning, would that change the seller's tax bill?

If there are any tips you guys can give me , I'd really appreciate it. Also, if you have any questions about my situation, let me know. 

Thanks BP!