I'd base that decision on the general rule that an unattached MH will depreciate over time, weakening your position later if your lease option buyer didn't exercise the option to purchase (ie you get back a trashed MH that's worth less than when you originally leased it).

I wonder how many investors are doing these math exercises.

My attorney (in NJ attorney is required for a RE transaction) also doesn't think it's a big deal and actually advised towards it (if they don't finish by closing we exercise the escrow).  

The only other option is to exercise your appraisal clause or financing clause and walk away. 

I have no idea how he'd afford the two down payments that way as this seems to be a huge drawback to me, but regardless I've suggested that as an exercise to test our partnership, we should at LEAST figure out how we could possibly structure this deal to be fair even if he decided not to take it.

Yes it was an important stage to work through and I am exercising extreme diligence with new applicants.

Technically, it may be exercised if the property transfers to another person or entity. 

The tenant paid on a monthly basis until exercising the option to purchase.  

We have tracked and logged more than 500 hours and materially participated more hours on the property than the rest of our team (cleaner, handymen, etc.) and would like to try and exercise the "STR Loophole" to offset W2 income for 2022.

I see it as this:   you are making the difference $30,000 and $17,200 = $12,800 less your closing costs and fees when you close on it - PLUS the $700 each month they stay there before they exercise.