Lease Option from a Parent

[Michael Montagna]

Feasibility for a refinance and lease option. My father and his wife plan on retiring to another state. They have roughly 150k of equity in a 450-500k home. They were planning on selling and taking that money to finish building their retirement home. 

I suggested, in my elementary understanding of cash out refinancing and lease options, that they should look into the following scenario. They properly pull out the equity in the home to put toward their retirement home as they wish, become legal landlords and rent out their home to me and my fiancé as we are not ready to purchase yet. This would allow them to be business owners generating a little cashflow from our rent, give us a place to live while having our rent go toward equity, and give us the option to purchase when the time is right or recoup our money if they sell. Also provides them a place to stay when visiting. 

If there is any legal, mortgage, or entity issues the community can think of, I'd appreciate the guidance. New