Pay the redemption amount right away, and escrow the balance of the purchase price for an agreed time period.

Now to purchase this home they require a down of 5% or 2,500, which ever is greater.At that point do you have to get a mortgage on the balance in order to Rehab Reno Re-finance?

The $200 of cash flow, which comes from the tenant not you, if applied to the mortgage would allow you to pay down the balance and do away with the PMI.

Most banks would be more concerned with your net worth (personal balance sheet) to see that you have equity to cover any short comings should they have to foreclose.

The amount of coverage decreases as the principal balance declines.

If you don’t have LLC,  you are not required to keep Balance sheet for tax purpose, so you really do not  to do anything.

I'm trying to balance reasonable/ fair rent prices and give them a little bit of a friend discount.

Single Family Home (East End Louisville)- Originally my primary residence ($209k)- Property is in our personal names (not in LLC)- Comps in the neighborhood are $285k- Built in 2002- In well established  neighborhood w/ middle income families- On 15 year 2.99% mortgage w/ 8 years remaining and $115k principal balance- Currently rents for $2,185 month/$26,200 annually- NOI $16,320- Cashflow $4,500/annually - $12k principal pay-down annual (current year)- Currently getting less than 3% return on our equityOriginal goal was to not cash flow but pay off property, allow appreciation, sell property at end of loan and use capital for additional projects. 

When the property is finally paid off its entire market value at that time in yours so it is as if you were setting up a bunch of savings accounts that will each have an equity balance that will belong to you , long term of course and the rest is just simply ways of managing the debt, cash flow, and appreciation to your advantage.

In this case, you will most likely have to pay taxes on the balance.