google All inclusive Deed of Trust state of CA.. that will give you a really good description and if you can find the actual deed of trust to read its a great wrap document .. in practice   you have a current 100K loan at 8%  you sell by owner and take a 125k note at 9%  the 125k wraps the 100k.. you continue to pay on the 100k the while the new owner is paying on the 125k  payment lets say on the 100k are 1k a month the new payment is 1.2k a month you make the 200.00 delta..

This is a great solution to figure out what to do with his stuff while we get everything figured out legally.

Do not rely on it for legal advice.

What documents are absolutely needed.

There is a happy medium and I'd rather see a legal framework.

Wondering if there is any other legal way of minimizing double taxation for my Cayman Partners. 

Your question is a legal question, so seek legal advice.

The lease/option as described will be 2 separate documents; the lease can be a standard rental agreement. 

I would only hire out for major work I can't do myself or emergency repairs.I've dealt with older houses before and the house may be fine for occupants but there's still usually lots of things that can be fixed / improved so it seems a house that isn't perfect would give more opportunities for ongoing maintenance of this sort.To me it seems fairly straightforward to meet the time requirements but I think I need to have extensive documentation?

Luckily, there is a long trail of litigation under the Fair Housing Act 1934 and the AFH Amendments of 1988 which established the legal grounds for those in recovery (by definition "disabled") to live together in a single family home.