Free & Clear Property w/ Seller Financing

[Alyn Shek]

Greetings to All.  Hope everyone had a festive holiday. 

I have an opportunity to purchase a 2 family frame and a 1 family frame house that sits on one lot. Neighborhood is A, if not A+ with great school.  It's in a desirable area within walking distance for transportation to NYC.  The seller has agreed with seller financing and I'm seeking advice from the great BP nation!  I checked for comparable sales and there are no similar properties sold within the past 12 months.  I should note that a single family in this area sells for low to high $300k. 

Asking price:                $470,000 (market value) 

Mortgage:                    None/Free & Clear

Property Taxes:           $1,166/monthly or $14,000/annually

Sewer Charge:             $100/monthly or 1,200/annually (2 family only)

Status:                         100% occupied with leases in place

Rental income:            $4,160/monthly or $49,920/annually

Market rent:                 $4,875/monthly or $58,500

Utilities:                       Heat, Hot Water, and Electric are all separated (Tenant's responsibility)

Insurance:                   $3,000 estimate 

Long time stable tenants with good paying history with one turnover in recent months, which was re-rented immediately within a couple of days.  The owner do not want to increase the rent as they are good and hassle free tenants. 

Reason:                     The owner is in their retirement age and is looking to sell the property                                   and relocate.  The owner has no immediate plans for the proceed,                                          a reason for seller financing.  

Plan:                          My plan is to put as little down as possible, 5% down 30 year                                                 amortization with interest payment only for 5 years. If the seller agrees                                   with this arrangement, the interest only payment will be                                                           $1,500/monthly or $18,000/annually, and the payments after the IO                                       will be $2,375.27 for 25 years.  

Strategy:                   The property needs rehab if I want to get market rent.  My strategy is                                     to rehab the property when the lease expires and slowly bring the                                         income of the property to market rate and subsequently, refinance                                         with the bank to pay off the seller.   

This is for investment purposes so I don't believe the Dodd Frank Act applies but please correct me if I'm wrong.  

I'm looking for creative advice on how to structure this seller financing with as little down as possible.  

Any advice is greatly appreciated!