Owner Financed SFH with Low Cash Flow - Deal or No Deal?

[Brian L Dowler]

I am a Pittsburgh based investor, focused on high quality SFH. I have an opportunity to use my self-directed IRA to buy a house at $240,000 (likely less) with 10% down and paying the owners $1,000 a month with no interest. In 60 months I have accrued $60,000 in equity on $24,000 down, but with only about $12,000 cash flow with a starting rent of $1,600 per month. I am not currently looking for cash flow, so am fine with taking the equity build as a retirement fund builder.

This would NOT be a good deal without owner financing - in fact the cash flow would likely be negative. But saving $750 a month in interest makes it interesting if banks are not involved.

After 5 years, I could refi through a bank, but would then again have low cash flow even with the equity build. So I would likely sell - or look for a LTO buyer.

The question is, do you feel this is a decent deal?  If I sell in 5 years, the Cash-on-Cash return is good. But it is sort of a dog after the initial 60 months. Any ideas?

[Jeremy Taggart]

@Brian L Dowler I'd probably just sell in 5 years. Milk it for the equity paydown and appreciation for those 5 years then sell. I'm pretty sure you have to pay a tax on financed property within a self directed IRA which is decently hefty so that would just make it even more less appealing after the refi. Check to make sure that wouldn't apply if it's seller financed too. I believe it's called UDFI