Interesting situation for a lease option

[Thomas C.]

I have an interesting situation where i am considering proposing a lease option and would appreciate some feedback and hopefully point out any aspects of the situation I might not be considering.

I was approached by a prospective tenant about leasing and/or buying my duplex. It would be a young guy his wife and 2 kids who just moved here from out of state. He claims to be in the entertainment business and sells cars on the side. He can't verify income but offers to pay for a year of rent in advance. His criminal and credit history are borderline but passable.

He says that he really wants to buy the whole duplex but would like to rent one of the apartments for a year first. His reasoning being that he wants to get to know the area as well as the property itself before buying.

He also mentions wanting to upgrade the floors and cabinets. I explain that it is simply not a good investment for me and that any upgrades he wants, will have to be paid for out of his own pocket. He claims he will replace all the floors with new carpet and hardwood for me at his own cost because he wants to buy the place eventually anyway and makes it clear that money is of no concern to him. Obviously my instincts tell me to turn and run the other direction but i'm trying to come up with a possible solution that could protect me enough to make it worth any potential risks

As far as I understand them, the laws are pretty limiting as far as how i can make this deal work. In NC 2 months rent is the maximum I can take as a security deposit and if he moves out early i would be legally obligated to return the prepaid rent. The only solution I could see working is setting up a lease option for him. Sell him the option to buy for around 5% of my desired selling price (a little under 200k) while leasing for 1 year. This way he has some skin in the game and if anything happens to the apartment he's out 10k.

The way i see it, this situation becomes a win win for me. If he does end up exercising the option I am selling at a price that I am very happy with and don't care what he does with the place. If he does not exercise the option I keep the 10k. The option money along with the security deposit should cover any conceivable damage even in a worst case scenario barring him intentionally destroying the property.

Please point out anything I might be missing or feel free to just tell me i'm an idiot for even bothering with this guy. I would also be interested in hearing any possible alternative options that people might come up with.