Creative financing for my parents home

[Evan Corsolini]

My parents are looking to downsize in the near future and I am wondering if there is a way for both of us to benefit. 

I have been looking into information on subject to and seller financing and have a broad understanding of the concepts but am wondering if anyone can tell me if my idea is even feasible. 

I moved into this house with my family in 2006, so I know the home is solid and in a desirable neighborhood with good schools. They refinanced their mortgage in 2021 at 2.85% and have a current monthly payment of around $900, overall balance about $200K. The house is worth between $500-550K and property taxes are about $12.5K annually. Based on my market research, it would rent for $3-3.5K, so there could still be some cash flow to be had even with taxes being absurd. 

Is there a way to use creative financing to make this situation mutually beneficial for me and my parents - take over their mortgage payment at an awesome rate, pay whatever extra interest we agree on and then rent it out? They get monthly passive income rather than a lump sum that is taxed and I can also make cash flow by turning it into a rental. And can this work with so much equity already in the home or is that just something you work into the terms of the deal?