Creative Financing - Seller Note?

[Jeff Stanish]

I'm in discussions to purchase a multi-unit (Retail 1st floor, residential 2nd floor) from a 2 person partnership. One owner (50%) wants to rent back the retail space for their business with a 3-5 year lease. My lender is asking for 25% down and I'm trying to think of ways to minimize my equity in. Initial though, approach the owner with a 3 year lease where they would give me a sellers note equal to that amount of rent at closing. This would about 'net' out the equity I would need at closing, thus 0% down in the deal and just need to cover the monthly deficit going forward given there would be just the cashflow ($1300/mo) from the upstairs residential to cover PITI and repairs. I ran this by my lender, after the sellers note they would still require 25% cash from me in the deal, thus the sellers note would just be a paydown/less of a loan. The only way around this I can think of is taking the note after closing to replace my equity, but then I would have to pay taxes on 3-years of rent all up front, which is not my preference.

Any other thoughts on minimizing the equity in on my end?  Quick numbers:  PP $225k, current loan bal $75k, each partner will net ~$70k, Retail rent $1500/mo ($18k/yr, $54k 3yr lease).

Thanks in advance for any thoughts/advice.