Seller financing with a bank loan in place

[Carrie Hallensleben]

I have found an investor who would like to sell a bundle of properties (3 SFH) in an area that I am very comfortable with. He has them priced below appraised value but the appraisal was done in 2009. He is willing to do seller financing but he has a traditional mortgage in place. We are meeting this week and I have a call into a lawyer. I have been reading like crazy about subject to and lease options. I want to show up with knowledge and this is the first seller financing deal I've ever negotiated.

Because there is a loan in place, I'm worried about a due on sale clause.  

What I know so far: 

3 houses - asking price $327,000 - current monthly rent $2600

Don't know any details of current mortgage or amount of equity

From our side:

We'd be able to put down 10,000 or 15,000 -(some of which would be borrowed money from our HELOC)

We'd love to do a 15 year seller financing and own outright at that point

Questions:

How would you structure the deal?

What kind of interest should we be paying?

How does the 5% over market with no interest at 180 payments type of deal work? (read about it on BP)

Could we set up a lease option that allowed for some of the payment to go to principal in order to drop the purchase price and then finance out later on? 

Looking forward to your ideas!