First owner financing proposal - Am I overlooking anything?

[Bruce Clark]

I looked at a duplex today in which the owner lives on the first floor and her niece (tenant) lives on the second floor. Prior to her niece she rented to her brother.  The realtor says she is selling because she is tired of being a landlord to her family members and she doesn't want to evict her niece. 

I am considering the following deal.

Purchase price: $40,000 - 100% owner financed.

I will pay the realtor commission of $2,500.

Term of the loan is 10 years at 6%. Payment is $444 per month.

However, I also give her a 10 year lease with a monthly payment of $444, which is about the market rate for the one bedroom unit she lives in. Basically she lives rent free for 10 years.

I have run the numbers using the rental property calculator and this will lead to a cash flow of about $150 per month. It is not much, but I will only have $2,500 total into the property, and it will be free and clear in only 10 years.

I am not sure if the seller will take it but I think it has upside for her. She is an older lady. She will have no rent, property tax, insurance, repairs, maintenance for the next 10 years. She wont have to move. She wont have to evict her niece. She wont have to pay her realtor. 

Now if I can only explain this proposal to the realtor so that she effectively conveys it to the seller...

Thoughts, recommendations, advice welcome!

[Shane Baganz]

Bruce,

Here's a paradigm shift.  Offer her three different deals.

1. $10,000 below at her asking price.

2. Her asking price at $50,000 with no interest.

3. Her asking price plus ($5,000) with no interest.

-Why overpay?

*You didn't.  The interest will cost you about $8,600 over 10 years.

You can over pay and still come out $3,600 ahead!

-Shane