Seller Financing Deal Structure

[Jonathan Dickerson]

An investor friend offered me first crack at buying his paid-for 5bd/3ba SFH that appraises for $500k and is currently rented for $3k/month on a 12-month lease. Expenses HOA - $125/month,

TAXES - $222/month,

INSURANCE - $333/month, Property management - 8% of rent = $240/month. Expecting annual appreciation of 4% on the property value and 5% on the rent, HOA, taxes and insurance. The seller is open to seller financing. I was hoping to structure a deal that involves paying the seller every month and then a balloon payment in 5 years (when I can get an 80% LTV cash out refinance to put a mortgage on the property without having to put any money down because I'll have built up at least 20%). Any suggestions on what is a fair amount to offer for the monthly interest payments and the balloon payment? Thanks all!