Does anyone know the rules about using gift funds for investing in property?

Even though you are allowed to give gifts of $, lenders are pretty diligent about asking where some of your money went or where $10k or more came from.  

We actually ended up net positive once the wedding gifts came in.

One suggestion you could give your PM, is give a monetary value I.e; gift card for outback, $50 off lastMonths rent etc,,, people tend to be a little more flexible 

Do you allow gifts and loans to form the basis of the "income?"

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If they exercised after 5 years, that would be a "gift" of $1,250/month over the first 5 years of their lease.

All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved.That appears to close the loophole. 

The lender I am trying to go through is telling me I will need 25 percent down, 6 months reserves on both properties and can not receive a gift of any amount for the second property.