@Dan BlaylockWe are coming out with a new product in the next 3-6 months that will be very similar to a partial where investors will have ability to get principal and interest payments.

The transfer should be a credit to the bank account, but the debit should be to Loan Payable for the principal amount and interest, and the rest to insurance and taxes.The LLC is a disregarded entity for IRS purposes and uses the owner's Social Security number to report on Schedule E, page one.

As they described it, the principal of the insurance earning interest wasn't diminished by the loan like, say, a 401k loan would be.

I am considering posing this as a zero interest deal, so the $72,000 ($2,000 x 36 months) paid in the 3 years leading up to the balloon would go straight into the principal, and so will the $17,500 down payment.

As Greg mentioned above, the appreciation and principal paydown is most likely more than the "loss" of $600 per month that you are paying in. 

If it was a 30 year with 15 years left, that amortization schedule for your principal balance looks a lot different than if it was a new 15 year mortgage. 

Even if the blended rate is higher than a cashout refi in the beginning, you can pay down the principal on the 2nd with your excess income while keeping the 1st mortgage in place as is.

You will then have a few options with that rent money....you can put it into principal or you can start saving it to purchase yet another property.

I have not been able to detect a patternAdditional recent changes include:  An agent can no longer collect a commission if they are a principal in the transaction. 

@Emma Hustiswell, they're separate - you'd negotiate the price and terms with the seller, and now that's your mortgage payment (principal and interest, or P&I)then, you plug that mortgage payment in, as an expenseso, use a mortgage calculator first to generate the monthly payment, based on the seller financing termshope this helps