You just outlined a much more direct approach, and I appreciate that.

Needs to be fluid and adaptable, within a certain outline of course..

Ask for a sample settlement statement that should outline all the fees.

It seems that is might be classified as rental income (therefore passive) under Sect 1.61-8 of the Treasury regs, but I am way out of my area of expertise here.Can anyone who has successfully completed lease-option projects or has experience with reporting your option fees provide an outline of how those fees were treated for tax purposes?

Jeffrey,When you acquire a note the Loan Sale Agreement will outline everything.

Our bank advised that the best way to proceed with this would be by adding the other two members to the title after closing, and we also have a strong operating agreement outlining all the critical details of this deal. 

Karl, is the judgment you reference above and beyond the eviction judgement that outlines that damages may also be assessed? 

There are tons of different business models and ways to make money in real estate, so you will see several of those outlined here on the site, but in most cases you are not signing up for a step by step course.

In his contingency there was no outlined sqft he desired, does this mean there was no meeting of the minds between him and Sellers and make this contract voidable?

By "tax-free" does this mean you received no government documents outlining how much you were paid?