Ideas/guidance - Structuring Owner finance on 3 SF's & 1 Dplx

[Shane H.]

Hi there - have to give credit to the podcasts for taking some of the steps I've taken the past 6 mos or so.  I feel even though I've owned a couple investment properties since 2006 I've just been piddle farting around (probably a midwest term) and haven't gotten as serious as I need to be.  Having my 2yo son definitely helps add fuel to the fire that was nothing more than glowing embers.

3 Single Family homes & 1 duplex

All in stable low B to B+ areas and not far from another investment property I have

Sounded as if I'd have one nightmare tenant I'd need to part ways with

Gross monthly rents $3800 - if I updated the units I am confident  I could at min bump that figure $500 or more a mo

Tax value of properties ~$350k  (I need to get inside the SF properties but $330-400 is probably a realistic market value as is now for the properties retail wise)

Owner said they'd sell for $380k and be willing to owner finance for 5 years (w possible balloon payment - I proposed those terms - no cash down)

I really need to get into the 3 single family homes and the other occupied unit of the duplex, but drove by them all and they looked in pretty decent shape on the outside -- one of the SF's they just invested $40k in within the past 5 years or so due to a hoarder situation and deferred maintenance so the house has been heavily overhauled - most have newer roofs and were built in the 50's (which around here was a good time period for construction - good lumber, homes are brick etc, duplex built in 1979 - from the unit I was in it's just cosmetically dated which would be no big deal for me to fix once someone moved out to make it more desireable)

What I was going to propose is if they would owner finance $380k - accept payments from me of $1055.56 per mo (380000 / 360 mos/30 years) - I'd pay the equity down for 5 years then at the end of year 5 we possibly renegotiate to pay part of it off by myself obtaining bank financing, all of it off, etc.

Ideally I'd like to see if I could get them to do this same deal for $350k or a bit less but the numbers work at $380k for me with no cash in.  I'd be willing to pay higher than what they are worth to have no cash in the deal and I'd in essence chalk up the additional $30k to an interest expense if you will.

I've done the numbers and accounting for 7% cap ex, 7% repairs, 5% vacancy, taxes, insurance, $375/mo mgmt fee payable to my property mgmt entity - the deal should still cash flow almost $700 so more than $100 a door and I'm pulling $375/mo as a mgmt fee.

Any other ideas on how to propose this or other creative solutions.  I felt they liked me and my former tenant spoke very highly of me to them.  

Their main concerns are minimizing tax liability and not having to worry about day to day anymore so they can enjoy retirement.  They just sold a business at the beginning of this year as well and are willing to sell the rental real estate tomorrow, january of 2017 etc - they just want to know it's in good hands.

(Another possible bonus - they have a VERY valuable property in our downtown core where their business was located -- it's listed with a commercial firm now - but I'd guess their listing agreement should expire soon - I could possibly see if something could be worked out for it as well -- however I'd need outside partners)

Maybe I'm looking for some attaboys or simply encouragement - this would be my first owner finance deal if I can pull it off.  i dont know I'd want to hold the properties long term as my vision is holding a large portfolio of A- single family rentals...these aren't quite in that but would give me cash flow, management fee income and fall within the realm of what I've been working with the last 10 years.