Better for all parties and you can stipulate the tenant does all repairs.  

There could be stipulations with regards to students and non-discrimination.

Also check out the Homestyle renovation loan from Fannie Mae, its the buddy of the 203k but I believe there is no PMI but there are stipulations about the before and after value of the home.Hope this helps @ Tim A.

Your lease should stipulate the minimum requirements of maintaining the home and what happens if they fail.

HI Jonna,What wayne mentions is generally correct however there are other FHA related guidelines to adhere to as well such as the self sufficiency rule in which states that in the event all units are rented at market that that monthly figure is able to cover the entire monthly PITIA (prin/int/tax/ins/assessments) of the 3-4 unit you are purchasing (this does not apply to 2 unit properties).There are other stipulations on 3-4 unit properties as well such as if you use a non occupant co-borrower you may need to put up to 15% down instead of the normal 3.5%. 

You've already agreed to let them stay with no other stipulations.

I don't remember specifics but in essence it was a failure of the sec 8 housing program failing to sign the document between land lord and housing program due to a stipulation in that contract.

You can also stipulate the property be turned over vacant at closing.

My PM said the money is guaranteed, but I stipulated that the background check had to be favorable, but not necessarily impeccable.  

Buyers performance on parcel B is secured with a 2nd mortgage (note and deed of trust) against parcel A - with an cancellation clause for seller without penalty or payment within 6mo.Own both parcels outright, no houses on parcel A, renter owns a mobile home on parcel B and the contract stipulates they can finish their lease on parcel B.Does this appear to be a secure approach with parcel B?