He was then able to obtain new financing and exercise his option.  

Also if i am able to do that, what if eventually the tenant wants to exercise their option to buy, will they pay me in full and then i pay the person i leased from??

So I would have to put down the earnest money beforehand, in order to even get to the point of exercising the right to show clause?

Figure out what you have into the property for total cost and than run a highest and best use analysis.This should tell you whether to rehab what is there or tear it down and build something new with the same asset class or a totally different asset class ( commercial, etc.).Additionally once you find out the highest and best use then look at the TIME required to develop that use and receive income from it or sell off.Some people will get the fire department to do a "controlled burn" on the property and use it as a fire exercise.

The Cash Flow game is also a fun & educational exercise you could integrate into your life.  

It is unlikely that we are ready to purchase our first property, or that we would be able to negotiate such a discount; however, I am doing exercises to ensure that I am familiarizing myself with the process.One thing about this duplex.

Best case scenario if the figure out a way to shave off a part of the deck.Worst case scenario the neighbor tells you off and at that point you should get some legal advice and exercise what ever right you do have.

She didn't like the fact that I wouldn't be the owner of the property and would get non-refundable option consideration money if the T/B doesn't exercise their option to buy.

Do you have the down payment shown or are you doing an exercise to get up to speed and learn?  

When purchasing via a lease option, do you get the seller to sign a option agreement and then record it, and not actually go through the closing process with a title company until you exercise your option years later?