New Member of BP with Owner Financing Deal Questions??

[Michael Outar]

Hello everyone. I just signed up. The reason I signed up with Bigger Pockets was to get more information about purchasing a multi-family home with Seller Financing.

I was introduced to my moms friend which is moving and wants to sell her home that has been divided up into 4 separate living areas. The house is in great shape and was built by her 40 years ago.The top floor is 3 bedrooms 2 bath with living and dining room and kitchen. The other 3 apartments are downstairs in the basement they are 1 bedrooms which are currently rented for $500 month. She lives upstairs. The reason this was so appealing to me was that she is willing to do owner financing for 25 years at  4% with 30k down. With all that I have read about owner financing it seems like a great deal for two reasons. The long term and the low interest rate. The problem I am having is determining if its worth paying a premium for the cost of the home. She wants 340K I have talked her down to her lowest of 330k. However, I haven't had a real estate agent or appraiser look at the home but from local research I am estimating the house to be worth 315k. This is based from single family house comps in the area, not a 4 plex. I talked with an appraiser friend and he said there aren't any comps in that area so it is very hard to come up with a proper value.

Bottom line: With the estimated rental income being $2500/month minus all my expenses (including maintenance and Cap Expenses) equal positive cash flow of $516 a month, but that is with myself being the property manager. I have never been a property manager. What is my time worth?

 I'm also concerned about having negative equality right from the beginning. I will be 5 years into the mortgage just getting above water if market stays the same. Is that OK as long as i have positive cash flow?? Is that enough cash flow for a 4 plex? Is owner financing really worth it if I want to do more rental investments in the future?

I appreciate the fact that I am able to just write about my questions in this forum. I would appreciate any wisdom someone could give on this problem. Thanks again.