Owner financed purchase

[Jiva Segaran]

Aloha BP ! I have a scenario that I wanted to run by and get some tips, advice and suggestions on. 

Im going to make an offer to buy my grandmother's condo in Hawaii which she owns free and clear. She is open to it because if she sold (it is her investment property), she would owe huge capital gains.  These are the terms: 20% Cash Down, then principal only payments for 10 years to pay off the balance. We would use either a Purchase Money Mortgage (Title passes to the buyer and a mortgage is recorded on title.) or Agreement of Sale (Title does not pass until the financing is paid in full.)

The rent should be able to pay the monthly payments.

She could really use the 20% cash down AND loves the idea of monthly payments to her and she not having to deal with tenants, repairs, bills, etc.

Im thinking I could possibly pull the equity back out with a mortgage?

Anyone have any suggestions on how this could work so she would avoid capital gains all at once?