What am I doing wrong with this analysis?

[Matthew Terry]

I'm taking initiative to analyze deals on a consistent basis for practice and to uncover potential opportunities. I recently saw a multi-family property, 16 units B class in a decent area for $2.4M on Loopnet. Seller will only do seller financing, 30% down and 5% IR 30yr. The claimed NOI is $129,500, 5.4% CAP rate. Debt service would be around $108,000 on a $1.68M loan, which leaves $21K. That is about 2.9% return on the $720K down payment. I don't know if property management was part of the NOI calc. Assuming it is and assuming you wouldn't have to spend another penny on repairs or improvements, why would anyone use $720K for a 2.9% return and all the potential hassle and risk of running a 16 unit building? I made 7% on Fundrise this year. Selling cash to a hard money lender would get 4-5% easily. LP in syndication would generate double that. Even a dividend stock portfolio would easily return more. All these examples are completely passive. Is there just massive speculation in the Phoenix multifamily market now? Am I not considering something? Do sellers price their properties high on Loopnet for an anchor when the buyer negotiates down?

For reference: 
https://www.loopnet.com/Listing/643-E-Brown-Rd-Mesa-AZ/17255707/

[Ryan Swan]

This is a tough property to sell because of the 5 parcels. You either need 5 individual loans, or a lender who can do one loan across multiple parcels. (or obviously buy it for all cash)

The seller terms offered are pretty competitive for a commercial scale assemblage. They are likely requiring seller financing because it allows the owner to liquidate the property and get a fat down payment, while still receiving predictable interest payments over the next 5 years. That's also why the terms include the graduated pre-payment penalties. 

I think investors really underestimate the risks associated with passive investments that pay a higher return. These risks include bad underwriting, outright borrower fraud (I've seen it happen on huge deals), borrower inexperience, bad tenants, construction delays, and larger macroeconomic or local economy factors. The difference with owning real estate is you have complete control of the project and with careful planning/underwriting, you can mitigate many long term risks.