Deal feedback for Wisconsin property

[Mark Nielsen]

My wife and I have been working on pursuing FI by increasing our buy and hold portfolio over a planned five year timeframe. Friends and family were aware of our side hustle and because of that a friend told us their mom had a house she would like us to look at purchasing since they would soon be looking to sell it and they'd rather sell it to someone they know and save realtor fees. 

We walked the property and saw a house in generally good condition with many updates and good maintenance, but based on the history of the property we thought it would be out of our price range. The house had been listed for sale a few years prior for $185k and they had a realtor friend run comps which came back at around $185k and our max purchase price was around $175k since we figured we could get around $1800/month rent and we try to stick to the 1% rule in our market. 

We told them we were going to have to pass on the opportunity because we didn't want to offend them with a low offer since houses in the current market were going for $10-15k over asking price and we figured they'd want around $200k. They asked us to give them an offer and they wouldn't be offended, so we said our max offer would be $177k. They immediately accepted and said they probably would have taken less!

Now, the part that I don't think I've ever heard anyone mention during any of the podcasts of blog posts I've read that was unique to our purchase offer was that we required the sellers enter into a one year lease of the property starting at the closing date. The reason for this was so that our financing could use the income from the lease in the calculations of DTI. We priced the rent of the property so that our DTI was fairly neutral after considering maintenance and mortgage payment to make the deal more attractive for the sellers. The sellers were happy to agree to that deal because it effectively meant they got the money they wanted for their property and were able to continue living in the house as if nothing had changed and allowed them more time to shop for their next home. In our lease agreement we allowed them to break the lease when we were able to get new tenants into the property if they were under their one year lease term.

The only odd thing that came up in the deal was that during the appraisal the appraising agent reviewed the purchase contract and said that it wasn't an arms length transaction because "the seller and buyer are friends" and because we required them to enter into a lease. Because of this our financing bank required us to sign an affidavit stating that it was an arms length transaction. After talking to our lender they were worried that there could be money switching hands that wasn't part of the official transaction because the purchase price of the house was under the appraised value (appraisal came back at $190k). 

Has anyone on here ever purchased a house like this requiring the seller to enter into a lease so they had an easier time securing financing?