Improvements needed?  

Should I try to save more money and improve my credit for a better rate or try to get creative financing for my possible investment.

Not knowing what they said take it as an opportunity to fix and improve rather than they were difficult.

It took me about three years, after improving the units, raising the rents yearly and reducing my costs, to break even.

The numbers depend on the neighborhood, but the old Harrowgate (which is much improved) numbers were crazy - buy in around 60-70k, limited rehab 5-10k, and rent for 1200.

What recommendations would have to improve our agreement structure to account for the risk?

Cash flow improves with time.  

I am not sure if this is the right place or not but I wanted some input into any obvious issues with my lease option offers to the tenant buyer that earns plenty of income but doesn't have the cash right now and wants to improve credit before purchasing but would like to lock in the price as our market is still struggling with inventory. 

Residential contractors are called HIC or home improvement contractors in Columbus.

Hope things improve moving forward for you and in the grand scheme of things, $2600 loss I would just chalk up to a lessons learned and one you can continue to teach others about in the future.