As far as rate is concerned, you can usually go about two points over the current rate (less closing costs for a seller financed deal so there is no real expense there) You need to make sure the borrower can cover that.

I don't do this for a living and have no real world experience, but at 40% down, even with a 7% int rate, that seems like a high monthly payment.

In this case, your monthly payment with 20% down will have a good MARKET rate if your DTI works with a much lower month payment and no mortgage insurance(MI).

If it's a good asset(meaning primarily good location), you eat the 5.3% cap no problem you own the physical asset.

Some considerations (in no particular order) are: What return on your equity are you currently getting?

The problem with that is that now you're no longer tracking what you've paid to actual vendors, so you lose the ability to issue 1099's and know what you've paid who at the end of the year.  

Have a decent rental history, including no past evictions.5.

Send me a Direct Message so we can determine if we are a good fit to work together and help you flip more properties in the Houston, Texas Area.I have a straight to the point and no BS approach so you will find some values when you reach out.Thank you 

You definitely can't just buy a building low down, do no work to it and keep old rents and expect to profit. 

Make sure the previous property management company did their job and communicated a change in management prior to you taking over--along with your contact information.If they have no done this, they should so the tenant doesn't feel like a scam may be going on.Just make sure they're away of where rent payments need to go and who they can contact in the future.