Renting former personal home - lease option + wrap?

[Joe Ort]

Here's the situation:

Moved out of our personal home. We're renting it out and the renter could be a great candidate for a lease option with seller financing since she's coming out of a bankruptcy not too long ago.

• Approx value is 525-550K.  
• Loan amount outstanding: 370K
• P&I: $1856/mo
• Escrow: $1100/mo (taxes are $8800/yr)
• Renting: $3900/mo

I have a HELOC so I can access 70K of the equity (already deployed) but that's a lot of equity sitting there.

Would you try to sell it when the lease is up to any buyer and move those funds elsewhere? Or wrap a mortgage and collect the spread?

I'm thinking 25K down 5.5% for 30 years, 5 year balloon (2981/mo P&I).

That would give me 25k to invest and then clear the $1000-ish/mo spread.

Anything I'm not thinking about? Ways to improve the deal?

What would you do?