When the lessee signs the agreement with the purchase option, you take the 140,000 that they owe, and subtract the 100,000 (80,000 owed to the bank and 20,000 owed back to the money man) which leaves $40,000.That $40,000 goes into your equity account (on paper).

Half of that would probably go towards those things , but would still leave me with 700 a month , I can put that towards the 750 rent so essentially I would only be paying $50 a month out of , while giving myself a place to live in the basement apartment of the 4-Plex , I would then plan to save up enough for another down payment and rent out the basement apartment for another 1400 bringing up my cash flow to 2800 a month but then subtracting the 750 for the rent and another 700 for maintenance and repairs and capital expenditures , what's I save up for a second house I would have $1,400 a month in cash flow from that fourplex and also have it cover my parents rent

Take the total rent roll - the unit you are living in and subtract all of the expenses.  

If we add the capital gains tax cost (subtracting 15% of whatever was gained during that 5 year period), we would actually need to have an average return of 19.75% to achieve the same results. 

If I am taking the income approach to find the properties value (which I believe based off research is the most accurate way, unless told otherwise), I know I would take the gross income of the property and subtract the operating expenses.

Multiply the new value by the LTV % subtract the current loan amount and that will be your gross cash out amount.

So sounds like a refinance to subtract that 1% interest will end up making sense!

  $3400/2 - $1750 = -$50 but 1) he is self managing 2) his mortgage may have escrow holding.So subtract 10% off the 50% for self management (but he is earning this 10% by doing the PM duties).$3400*0.6-$1750=$290

You need to subtract the renovation costs from that as well.

Once you have that number (maybe it ends up being $160k, maybe it doesn't), take 70% of it (or maybe even 65% if you're new to the process), then subtract your renovation, holding and closing costs, which will vary based on a number of factors.In your case, let's play it safe and say the the home ultimately sells for $150k.