So from a legal stand point, yes it is wrong and probably fraud if you had the intent to not live there 12 months.

If it's $140k mortgage with $40k back, that's mortgage fraud. 

If you have 2 identical homes, one renting for $500 and the other $1000, replacing the roof is going to cost the same it won't be cheaper for the lower rent home.If the buy, live in, fix-up, then rent out works for you and you are comfortable with that strategy why not stick with it. 

You are right that you have to know what you're looking at in comps because two identical row homes can have or lack features that make a huge difference to the user's quality of life.

You could sell the option at the lower end, say $2,500 and not credit it to the price, but good luck marketing that, most will expect the credits.We also have new IRS requirements with options greater than 12 months, they will most likely be treated as a sale by the owner requiring taxes to become due unless you take steps in the option contract being specific as to the intent to purchase and give a valid reason the option is not to be taken when it's made.An owner who rents residential property requiring a tenant to make repairs and/or improvements is asking for trouble, tax fraud!

A thorough response as always.I have my own take, and as any attorney will say, this is not legal advice...For the asset protection purposes you need both (1) insurance and (2) properly structured company for litigation protection, an LLC/LP/etc.Insurance protects your from nuisance that occur on the property; i.e. slip and fallThe company structure protects your assets from litigation liability; i.e. gross negligence (health and safety, alleged known hazards, fraud in the sale of the property) as well as someone getting to your assets by suing you personally (e.x. you got into a car wreck that exceeded the coverage of your policy, now they can go after your assets)The due on sale clause is often a concern, but me and my colleagues view it as a very low risk for a number of reasons.

Buyers depend on a thorough in depth home inspection and a good faith disclosure on the sellers side ...what is my recourse for remediation against fraud.

THE ATTACHED FILE IS A COPY OF YOUR LOAN TERM AND REPAYMENT SCHEDULE AND YOU ARE REQUIRED TO GO THROUGH IT AND GET BACK TO ME WITH A CLEAR SCANNED COPY OF ANY OF YOUR VALID IDENTITY CARD AND A CORRECTLY FILLED OUT BANKING DETAILS TO ENABLE US PROCEED ON YOUR LOAN FUNDS TRANSFER.I AWAIT YOUR RESPONSE TO THIS EMAIL;REGARDS,MARTIN GRIMES.

Haha I had the IDENTICAL issue with two females last Aug.

The tenant would be my mom, there's a vacant house (3 years) on her street, identical to her house just with a garage, she wants the garage.