Consider Hiring a Legal Expert- German property law can be complex.

DSCR would be considered a Non-qualified mortgage.

Set a bunch of them with peanut butter.

Market Selection: What factors do you consider when choosing a profitable location?

This way, they get the cash they need without selling and without triggering any taxes since loans aren’t considered taxable income.

I think you should seriously consider your financial goals and strategies.

When you are creating notes from the start with the intent to sale, you can also consider a 1st/2nd structure that can help you achieve similar results as a partial but start getting cash flow sooner. 

I'd need the interest rate to be roughly 5% to breakeven on an interest-only loan, and was considering a balloon payment in 5-7 years.

Personally I wouldn't feel comfortable trying to wholesale a relatives $1M home knowing that I am breaking the law if I cross over into doing anything that can be considered representing them in the transaction, and knowing it will only be marketed to people who buy properties wholesale (typically investors who don't want to pay retail prices), instead of the majority of retail buyers active in the market who are typcially willing to pay more. 

Stay disciplined and avoid rushing into deals without thorough due diligence.Resources for InvestorsIf you’re new to investing in distressed properties or looking to expand your portfolio, consider leveraging resources like:Local Realtors: Realtors specializing in distressed properties can assist in locating off-market deals and navigating complex transactions.Community Forums: Attend a local investor meetup or join online forums for the Phoenix market.Educational Tools: Search out webinars, workshops, or courses on investing in distressed properties.Final ThoughtsThe distressed property market in Phoenix is creating some excellent potential for the right investors willing to go the extra mile necessary to take on strategic risks associated with this category of real estate.