Please Pressure-Test My BRRRR deal!

[Nicholas LaGatta]

I'm a residential BRRRR investor, agent, and builder with a modest portfolio of 10 properties and actively growing. I've got a neighbor that's provided private money on 2 deals and it's been a tremendously synergistic relationship. Now my neighbor wants to sell his primary residence and move out of state.

We are currently discussing how we can make a mutually beneficial deal.  He has an attractive and well-maintained retail house in East Point in a B/C area that is a nice mix of cash flow and appreciation.  

I think his house is worth $165k.  However, I think I'd be willing to pay $185k, contingent on (1) owner financing at 3.5% interest-only, the seller's opportunity cost in this case, (2) no down-payment, only cash outlay is $10k for closing costs, AC repair, and typical rent-ready costs.  The seller gets a premium sale price and will save  $11k in commisions. Win-win, all day.

I would end up cash flowing roughly $300 per month, after ITI, management, capital, etc., a cash on cash return of around 30+%.  I wouldn't be able to refi until the property is worth at least $225k or more.  Also, once I refinance, there is a very strong chance that the investor will reinvest the money with me, albeit at a rate closer to 8%.  

This would be my 4th owner finance type deal, but I've never bought a retail priced property with exactly this strategy.  What might I be overlooking?