say I have a seller under contract who is willing to owner finance for a few years with a down payment, then balloon.  

Basics of the deal:Asking $750,000 with seller to owner finance with $25,000 depositGross income - $111,000Taxes - will be 3.7% of actual sales priceInsurance - $7,000Utilities are $7500 Assuming 5% vacancy rate and 10% repairs (property has had recent maintenance work and new roof and parking lot and nothing that appears imminent)Assuming 7% property management (which is average for our area) although we will self-manage at first although I know that we need to consider it in our analysisThe numbers don't work at their asking price.We'd like to offer $625,000 at 6.5% interest for 30 years, balloon after 20 yearsThe cash on cash return without the property management is 27% but with the property management, there is potential for negative cash flow in years with high vacancy and repairs.

I have had multiple letters wanting to buy but Im not sure if I should cash in now and start with landlording.

You can hold a tenant to the letter of the law or be more flexible. 

Once I did something like this and had the seller give the title co a letter of how to distribute their proceeds from the sale.  

As for the letter, just keep it short and to the point.  

No private lender is going to "gift letter" you the money you borrow for a FHA loan unless its maybe family.  

A service company to collect the monies and submit letters, stating the NEW title holder in which the asset has been assigned to has been bought.

What i want to figure out is the best way to approach acquiring the property now that i have info others don't and before she is convinced to sell.Will sending yellow letters be a good starting point?

I work for a private lender in California, we call our LOIs "Letters of Intent" However, most lenders will require a due diligence fee after an LOI is issued.