Best candidates for adding bedrooms downstairs for us have been basements where there is NO/MINIMAL risk of water intrusion as-is, and where there's already some finish (or mostly finished space), but just not the official bedroom.

If you own it for 2 years as your official primary residence (where your driver's license and voting is registered, oh and where you officially live, of course), you'll qualify for the capital gains exemption up to $250k when you sell.Sometimes just having another pair of eyes helps to uncover your options.

There may be some slight changes since the official counts come out after all certificates are paid.Rates were down this year along with the number of liens available, and total $ sold.

The purchase price on the lease option is super cheap because the house needs work,, but  Johnny will be walking into a ton of equity when he becomes the official owner. 

Roughly a year and some change later I’m officially closing on the $130000 property with an $80000 loan.

I would carry my plan to the local zoning official beforehand.

And most importantly, what type of document is needed to make the loan "official"?

If in your personal name the Drivers License, if in Entity then operating agreement, certificate of good business standing.Previous tax return showing that the unit has been rented in the past by you.Occupancy permit issued to you or your entity.Rental Inspection completed by a gov't official issued to you or your entity.Are you registered locally with any chambers of commerce, etc.

You'll want to validate your assumptions and firm up some of your numbers before you are on the "official" due diligence clock. 

It is not a indication of when rent is officially late.