If you set up the loan as interest only, the principal won't change. 

Here's the biggest needs & what most people are looking for generally speaking:1) Deals2) Private $3) Sponsors/Key principals to go on a loan4) Help underwriting5) Help with research, making phone calls, administrative tasks, etc.So that said- like @Todd Dexheimer mentioned, what is your skill set?  

Comparing these terms to the best financing I've found through a bank ($320k loan, 5.5% fixed for 10 years then refinance, amortized over 25), with same purchase price and down payment, results in a lower monthly payment by $315/mo, plus my principal balance after 10 years of payments through bank financing would be $240,000, compared to the $180,000 balloon that the seller wants at year 10. 

Comparing these terms to the best financing I've found through a bank ($320k loan, 5.5% fixed for 10 years then refinance, amortized over 25), with same purchase price and down payment, results in a lower monthly payment by $315/mo, plus my principal balance after 10 years of payments through bank financing would be $240,000, compared to the $180,000 balloon that the seller wants at year 10.

It's a smart move to buy a duplex, triplex or fourplex and make one unit your principal residence - this way you only need a minimum down payment.  

Just kiddin'.Anyone going through foreclosure has several things going on: 1) They are under a lot of stress, 2) Everybody is mailing to them and knocking on their door, 3) They are embarrassed, 4) They feel helpless, 5) They have the belief that winning the lotto will bail them out at the last minute, 6) It's the bank's fault, 7) This can't be happening to them, 8) They don't want to sell, 9) The house (even though it has a leaky roof and hasn't been kept up) is worth more than market price, 10) Believe you are there to take advantage of them, 11) Believe the government should do more to protect them, 12) Believe that their payments reduce the principal directly proportionate to their payment (Have no concept of compound interest, what Einstein called "the 8th wonder of the world"). 13) They can file a Chapt 13 bankruptcy at the last minute and keep the house if they have income, 14) They will wait until the day before the sale and call you if none of the other solutions work.Your opening comment should be " I buy houses in the area and I was wondering if you or someone you know might be interested in selling".

The buyer is just that buying the property they pay tax, insurance and your principal and interest and an escrow service fee.

Here's a sample of fine print:“Borrower shall occupy, establish, and use the Property as Borrower’s principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower’s control.”Different lenders have different "fine print" statements that may be more grey and confusing.

But the after 1 year value isn't making any sense to me.Just logically thinking, the equity after year 1 should be the Initial Equity + Principal Repayment which I am using the Excel Formula PPMT to figure out.If anyone could provide some help with this I would greatly appreciate it!

For you analysis, you need to figure out how the utilities are split, what you pay, if you are able to transfer costs to tenants, and how much of the mortgage pmt goes to principal.