5-Plex Seller Finance Deal Analysis

[Tim Nethers]

I have a decent relationship with the owner of a 5-plex in a small town in Indiana. The 5-plex is fully occupied, and professionally managed, pulling in $657/unit. The owner is willing to sell it to me with seller finance with $12k down, 5.75% for 3 years (22 mo amort.), $1000 in closing costs; but the price is higher than what I'd like to pay. I'd like to be at $185k (7.25% capex), the seller is asking $203k - non-negotiable. 

Expenses are $1,987/mo, including $475/mo in utilities, before P&I. When accounting for vacancy, management, capex, utilities, repair expenses and the financing, its cash flow would be roughly -$100-140/mo at that asking price (not factoring depreciation, appreciation and debt pay down).

I love the idea of adding a 5-unit, but I wanted some other eyes on the deal with more experience to assist in whether its a good idea to take it on for the appreciation/long term hold strategy - with such little skin in the game and with it being potentially negative cash flowing. I've historically bought single family and small multifamily, and never bought anything that isn't cash flowing. 

Knowing that I'd probably be subject to higher rates after the 3 year seller financing, and the asking price leaves it cash-flow slightly negative, I'm wondering if I still go-in knowing that it appraised at $250k last year, and when you consider the debt paydown, depreciation and appreciation factors are a huge upside versus the amount of funds I'd have in the deal. Would you buy or pass?