Purposely overpay for seller-financed rental?

[Rick Park]

Duplex next to good college that rents 8 rooms to varsity athletes. since 2007 there have been no vacancies and no serious issues with tennants. Year lease, quarterly collection. house was purchased for $170,000 in 2007. Seller has significantly improved property. new appliances, roof, pole barn, bathrooms. Im in Northeast PA where house prices don't really improve much.

Income - $440/student x 8 students = $3,520/mo

Expenses - $500/mo for taxes and other expenditures. Tennants pay utilities.

Net income $3,020/mo

seller told me to take a look at the rent and make him an offer.

My offer:

$250,000 purchase price

$20,000 down

4.5% interest

20yr ammoratization

5yr balloon

His response:

$269,900 price

$20,000 down

4.89%

20yr amm./5yr ballon

I'm having it appraised today. I'm worried that it's going to come in below what my payout would be at the 5yr balloon payment, which means i would have to come up with the difference, as well as the 25% down for the 2nd mortgage. OR, what also has me concerned is if i create terms that would put my 5yr payout at whatever the appraisal comes back with, but then what happens if theres a downturn in the market and the house is no longer worth what my payout amount is?

Am i totally nuts for thinking its ok to overpay for this house? The way i see it, i am treating the property as a business, which is what i'm purchasing.. the structure is just a piece of it.

Anyone been in a similar situation?

Thank you!