Choose the one that offers the best deal and service, and you'll be set to move forward with the process.

This takes a little more work, but it's the fairest and reduces the likelihood of tenants that squander utilities.If you choose #2 or #3, there are considerations:Start with an average.

In my opinion, it is better to choose an area with a path to progress. 

You have to evaluate the situation for yourself and choose your hard.

@Michael DartenMichael,Let me know who choose and how it works out, I wouldn’t mind having a backup.

LTV & CreditEliminate the emotion and treat this like the business it is.In my opinion it does not matter who the borrower is as long as they have a track record of ATR (Credit)And I feel comfortable with the leverage (LTV)

@Zach Denny - I agree - chances are the institutional lender won't be comfortable with an owner-financed 2nd and 100% combined loan to value.

Sometimes I have to show clients the math for them to get comfortable with it. 

Make sure the lender you choose has a strong background in this type of lending...check them out on Linked In to see their experience level.

Get comfortable with a certain degree of uncertainty but still take action.