I don't necessarily think any speculative discussion is off the table at this point.I could buy this house (or any other one in the area) from the owners and have a regular mortgage and continue investing otherwise.

Private Lending Attorney Here-First it depends if the person lending the money will be doing this on an ongoing basis - if so he may want to have a separate entity created for that business.As far as documenting the loan - I would recommend speaking with an attorney who regularly handles these transactions. 

Because we plan on employing the lease option model, the property management will be lower than a regular rental and they will make more money than a regular rental.  

One of the agents who attends regularly had the listing coming soon and told me about it.

This was not the loan servicer's fault as they sent the reinstatement quote to me for approval.Lesson learned: have systems in place to make sure that your recoverable invoices are regularly forwarded to your loan servicer.

For that reason, have a cleaning service come regularly. 

Report to them regularly, especially when the plan diverges from what is happening and demonstrate that your contingency planning is kicking in to help mitigate the risks to the degree you can. 

You might consider pricing at market price.Renting to a (verified) business can be lucrative, but that is generally very different than a regular rental.....

Was the appraisal as part of any event or this was regular annual appraisal?

One important consideration is your property management, since you will not be able to see your property with any degree of regularity.