I suggest this option for younger folks who are starting out...and of course, keep working a "normal" job for a bit to continue upping your income to buy more investments (whether in RE or otherwise).

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.

He's offered it to me on a lease-option agreement, with a "purchase price" of $1.2M, "down payment" of $200k and 5% interest only payments on the $1M debt.

Rates have limited my options over the past year, but now I have to find a solution asap that makes sense .

I wanted to vet all Exit strategies possible to know what options would best fit. 

One consideration is to always check the Clue report with your insurance agent during the option period to see insurance costs and potential coverage and past claims.  

I found out that the seller is very motivated and is offering ALL types of creative financing options with rates as low as 3.75%.

My question is if i purchase the property as seller finance and there is a promissory note what are my options for loans on the new construction?

When you're looking for possible 1031 replacement options, remember that you have a very wide net of potential assets to reinvest in. 

Our required contracts include spelled out options on how a seller will pay a commissions and how the listing agent will (or will not) split that money with a buyer's agent.