I'm not a realtor but I work with one and I'm definitely thinking of referring them to him to sell if this doesn't work out this way.

That's a lot of space but building out lots can be pricey and filling them is as well, not to mention time/labor intensive.

If you are doing rehab work you can sometimes work out throw-ins like that. 

I would work with the property owner and see if we can work out a negotiation charging the tenant for a fair amount and the remainder be paid by the landlord.

In the future when kids come a long I could take over the rest of the house or if things work out well and rates are down I can refi and maybe rent out the entire house at a close to profit and buy a new primary house for my family.Im not sure if any of that is realistic though.

I'm trying to work out the pros and cons, some help from those experienced is greatly appreciated.1. 

I'm not a huge fan of hard money lenders either but sometimes they work out.

Owners work out the compensation with the individual directly (typically around 10% of the revenue) and this generally reduces management costs from the standard (25-35%!)

@Will Smith @Lee Li feel free to send me a message to see if we may be able to help or guide you to a reasonable solution if that does not work out.  

I am currently looking at a property, still the early stages and may not work out, but it raised a good question.