Income tax benefits: You can take a dividend income which is taxed at a much lower income tax rate. 2. 

I'd make a stink of the repairs and ask for a lower purchase price.

The unique situation of wanting to stay in the property will deter most buyers.Possibly negotiate a lower rent for the 1st year for a reduced sales price. 

In a seller financed deal is 5% or lower down payment common?

Tried to explain to one that some -not all-agents don't show listing with lower buyers commission and he wanted to argue with me about it was our fiduciary duty to show all. 

If they specifically need to cash-out to buy another home than seller financing is often DOA.As mentioned, if the have a balance on their underlying mortage- If they want to pay it off it might require a big downpayment- It is possible to leave it in place with a Wrap but that is an advanced strategy and while fairly low risk, the due on sales clause is a concern.On interest rate, my experience is that a seller finance buyer usually has to pay a few points above the going interest rate for conventional/FHA lending so probably closer to 7% these days although it never hurts to ask for lower...All of this is theoretical so the advice to chat with seller to get more information is the right next step.Jeff

If you purchase a quad and live in one unit, you will never be lower than 25% and most likely will be 75-100% most of the time.Using the cash to qualify for loans on the new property means you would probably only need 25-35% down including closing costs.

They will go max $100k or 70% LTV whichever is lower.

My area of uncertainty has to do with the lower quality property in a lower income neighborhood.

But if I can guess here a little...FHA loan will have a significantly lower down payment for a multi-family unit - 3.5% down.