You would be mitigating a lot risk as a homeowner. 

However, on Groundfloor you can only invest in individual properties, and can't easily pool your risk like you can through buying shares of equity investment eREIT's which are offered on many of the platforms.I have seen some sites which combine debt/equity investments into an eREIT, but I haven't seen any debt only offerings for some reason.

If you have never owned a rental to start out with renters that only pay 375 to 450 a month is a huge risk.. that's the bottom of the tenant pool.. and very tough to manage tons of turn over tons of drama.I would not recommend this type of property for a first investment. regardless of your negotiations with the seller … no money down low ball for a performing property rarely if ever works.. works if half were vacant or something or burnt out landlord.. but hey you tried.. 

Lenders have their own risk-assessment criteria.

I do have concerns about the risk but does it *ever* make sense for a seller to enter into this sort of agreement?

@Andrei Bortnov the property values in the north do better with the cash flow calculations compared to other areas but I realize that the risk is a lot higher too.

My understanding is that there that there are three rungs:1) "Garbage" companies think penny stocks - poor return/risk profile2) 500k-1.5m companies (20-30% a year???)

I want to get my financing within an LLC and it’s very difficult to find a reasonable interest rate.I have worked 25 years to build a modest net worth and will not risk losing it in a frivolous lawsuit by not having the proper legal entity in place that only costs a couple $100 to create and protect my life’s work.People who advise that an insurance policy alone is enough are not necessarily correct in my opinion.

If you do not do it this way then you risk running your unit vacant because college students tend to start looking for a place to stay around Feb-May for the following year, actually more like Mar-May, but you want the Ad up in Feb.

However, there's obviously risk that comes along with this.