Do you need or want monthly cashflow, tax write-offs, betting on appreciation,....   

This is not as passive as other investing but it will help launch your portfolio so that you can continue to invest without needing to work additional jobs.

I heard that less than 20% down causes additional insurance fee? 

Is the portal that the landlord and tenants use an additional charge?

In addition, when you have leverage you have the other benefits which @Ali Boone mention.

We look at lenders (so long as they lend in the asset class you are considering) as an additional line of due diligence (they deeply care about their money and they are likely more sophisticated than you are).

OF COURSE the Contractor is going to say you need to tear it all out and rebuild the wall(s)  because that's the absolute easiest solution and adds additional work for him.

There are also 'mezz' lenders (typically for larger transactions) who will cover up to 90% CLTV and require you to bring the remaining equity to the deal, and additionally there is Gap Funding in the form of unsecured personal debt.The latter can potentially be the most expensive option, but allows for true 100% financing as there are no restrictions for how to use these funds, as they are unsecured, and generally obtained through personal credit, income etc (since there is no collateral for obtaining these funds).

Seller will be taking a 30k+ loss with this route.325k with 50K down to seller, 3 years of payments $1600/month, and a balloon payment of 215k at the end of 3 years.Benefits to me: (1) 10k less downpayment, (2) with the conventional route, the loan would be at 228k after 3 years of payments, so I will gain additional equity with the 2nd option since I will owe 215k (presumably I will have to refinance at that time).Benefit to seller: she gets over asking price, 50K upfront and $300/month of cash flow.Does this offer and structure sound reasonable?

An umbrella policy for additional liability.