Duplex Deal w/ Owner Finance Opportunity

[Jeff Williams]

I am a property manager and I have come across a deal that has easy potential to convert to from single family to a duplex. The property is currently listed both for rent and for sale. The rental listing is asking $1,150 for both floors rented as one unit. 

However, in the current layout, the two floors have their own front doors, and are only accessible to each other by exterior stairs, and both floors currently have full bathrooms. The upstairs unit also has a full kitchen and bedroom, while the downstairs unit has only a living room and bathroom. The property is on pier and beam foundation so I can fairly easily install a kitchen and plumbing myself in the downstairs unit converting it to a studio, while leaving the upstairs as a 1x1. The property is also inside the HOA community that I currently reside in, making it convenient to self-manage as a rental.

I estimate the property to need about $10k-$15k in repairs including adding the downstairs kitchen, and I can afford about a 5% down payment. With today's interest rates and my inability to afford a down payment more than 5%, I can't make the deal pencil out with positive cashflow using conventional financing. But the owner has indicated that they'd be willing to do seller financing. I have no experience negotiating a seller financed deal. What would be a good starting point to negotiate while prioritizing cashflow?

Asking price: $160,000

Potential Rent: $1,600/month ($900 + $700)