First possible deal using creative financing as an option - help!

[Han Oh]

Hi BP Nation,

My partner and I got a hot lead in north OC and need input from experienced investors to properly structure the deal.

Property is owner occupied, seller is 4 months behind in payments and was recently served an NOD. He's also behind in HOA payments. The total arrears, according to him, is about $10K.

He bought the property in '05 for $525K and has not put much work into it. He owes $150K on it, with a monthly mortgage payment of $808. Very rough ballpark figure for the repairs is $30K-40K (will be getting more details about the condition on our next call today). Sold comps around the area run about $465000 on average.

We are thinking about offering him 3 options. 

OPTION 1

Full cash price at 80% of the ARV - repairs - arrears, about $325K. We'll start negotiating at 75% and come up to 80% if we have to. If we can do this, our exit strategy would be to wholesale it or JV with a flipper investor to flip it.

OPTION 2

This is where we have questions. If he's OK to get paid over time, we can offer him more using payment in terms. In this case our exit strategy would be to rent it out. Is there any way we can structure this deal using a combination of sub2 and seller financing? I ran some numbers myself and see if we do that we could potentially end up with a monthly payment amount that will not make sense to keep this as a rental. Maybe another exit could be to find a TB on a LO? Say we can agree to buy it at $400K, put about $35K in repairs and advertise the property as rent to own for $470K? Property is in a good location with excellent schools. 

OPTION 3

Offer the seller to have the property listed and sold the traditional way. 

Appreciate all of your valuable inputs in advance!!