0% interest on a seller financing deal

[Addison McCarty]

First post to BiggerPockets and my potential first deal as an investor with hopefully many more to come. I would like some advise (contract, clauses, ideas) to make this deal as good as possible for me. I will give the scenario below.

Beautiful 4br 2.5b FSBO owned free and clear (on the market over a year) for 235k (appraises for 238k conservative). Talked with the seller and he is willing to finance the deal at 0% interest with a payment that matches a 20 year schedule (about $850 a month not including taxes/insurance). However, he wants a balloon payment at the end of 7 years. He also wants 30k down (I know, so much for no money down deals...) I want to do a lease option on the house if I close the deal and it could conservatively bring $1250-$1400 a month rent no problem. I also have 3 colleges within 15 min of this house as a back up rental plan.

I don't want to put 30k down which is pretty much all I have to get started in real estate but at the same time, this deal has potential to score big time and would be willing to tie up that cash for a good enough deal. A renter paying 100% equity is hard to pass up. The seller is very motivated but because of the low holding costs, he is not going to be taken advantage of (nor am I in the business of taking advantage).

Can I get your honest opinion!!!! I am self starting my real estate business and would value some expert guidance.

-Addison-

[Russell Brazil]

0% interest....I'd do this deal in a heartbeat. I wouldn't be looking at a lease option on the backend, just a straight rental though. It doesn't matter if you are just breaking even because your going to build equity up very quickly on a 20 verses a 30 year note. 

Everyone telling you not to buy is only looking at the cash on cash return and that will be low to non existent on the 20 year note...but with 0% interest combined with the 20 year note your internal rate of return is going to be very nice.