Duplex Lease option and Roommate Law in NYS

[Lawrence Rutkowski]

Hello all,

I own a duplex in the city of Buffalo NY. I am looking at drawing up a lease-option for my downstairs tenants who have been with me for 8 years.

I have never done one of these and would be appreciative for some advice in structuring. 

Essentially, I would like deposit money, and have downstairs manage the property while cash flowing a few hundred dollars per month. I would also like to know how you would calculate the purchase price 3 years from now. 

What I would like to do in my perfect world, is have a 3 year term, $10k-$15k deposit/down payment, (house just appraised for $150,000.) have downstairs maintain the property (they do 3/4 of the maintenance now, but they would now be out of pocket) and manage upstairs tenants and collect and keep the rent (Upstairs $800). I am in the process of a cash-out refi, my new PITI will be about $750/month, up from $580. I would like to receive monthly payments from downstairs of $1,100-$1,200. They are currently under market rent at $750(because of longevity and maintenance/lawn/snow etc).

Downstairs received $30k this month from an insurance settlement. Otherwise, they are not high earners. With what they make, and factoring in rental income, they should be good for a loan down the road barring more pandemics or tougher money.

Is this reasonable? Fair? Smart? I am open to input. I'm not ready to sell outright at this moment, but I am looking at exit strategies out of NYS as I live and own properties in San Antonio, and I'm getting less enthusiastic about managing 1700 miles away. Of course the landlord-tenant laws in NY are deplorable, and only getting worse it seems. (No, I am not interested in selling to you unless you want to pay retail.)

The second part of this, 

I've recently acquired new tenants upstairs in October.  

I've received several excessive noise complaints from downstairs, and that they've tried talking it out to no avail. IF we execute this lease option, and IF it came to possible eviction, would downstairs have an easier time since they live in the building? Would the "Roommate law" apply at all (or something else?), or would it be moot because I would still hold title? 

I intend to speak with an attorney soon, but would like a better understanding before I do. (If you have any great referrals, I will be happy to check them out.)

Also, I'm looking for advice on what I asked, not on tenant management or soliciting cash offers. I've been landlording, flipping, realtoring (is that a word??) for a long time. I'm not "burned out" because of noise complaints, or really at all. This just happens to be happening simultaneously, and the lease option mechanics are new to me.

Hopefully I didn't come off as an *** on that last part, throwing it in there from past experience..  Relevant constructive input is much appreciated here.