Typically, this is an obvious no-go, but since I'd be living in the SFH, I'm looking at it as if that is my mortgage/rent payment until I can refinance.  

FMR 700/monthTaxes: $3515/yrAsking Price from seller is $127,900 My offer:Purchase price of $85k with $10,000 down of OPM.Loan amount from seller: $75k at 8% APR, 5 year balloon interest only payments of $500/month.  

I will use the reduction in the down payment to take care of the immediate sewer issue. 

I would like to purchase more rentals but do not have the down payment.

From what I've read, you buy the liens at auction and you don't bid up the price of the lean, rather you bid down the interest you're willing to receive on the delinquent payments.

This cash flow does not include equity gain from making the payment which is in effect additional cash flow that can be obtained with a little effort.

If your in a big hurry , see if you can qualify for a FHA loan now and have a family member gift you the 3.5% down payment.

While the deal was 10K at signing, 5K per month, 10K on 1st anniversary the formal payments were 9.5K for ML at signing,  5K per month for lease, 500 at signing for option,10K for option at first anniversary. 

He is open to seller finance, but he didn't want to give me a number for a down payment.

The balance =         ~$49,500 with payments of ~$450 per month (PITI)- Current rent roll = $1325 per month; PM = 130 per month- Current ROI for the Middletown duplex =         [($1325 x 12) - ($450 x 12) - (130 x 12)] / $25,400 = 35% ROI