What are the holes in this business model?

[Adam Black]

I have been asked to be a part of an existing business starting up operations in a new market. Basically they use owner financing as their debt servicer. the model goes as.
Acquire properties in low to middle income areas and rehab at less than 50% ARV.
Take $15,000 out of each property not to exceed 75% ARV
These properties are placed in a commerical line of credit at prime plus 1% on a 6 year ballon with a 7 year extension available.
Seller finance at ARV with 3% down and 9%-11%, 30 Year Am
The goal is to have everything paid in 12 years.
They are 6 years into this with about 450 properties. This is their second cycle. First one paid off huge!!. The current one has had some management issues that has cause it some unstability but it also has 6 years to correct and some liquidity to continue.

What are your thoughts? Why would you do this vs. a rent and hold model? Rents in these areas would net you about $50-$100 more per month but of course you would have maintenance issues.