If renter fails to make the interest payment the lean holder could exercise their right to the property and take the title back.I'm sure there are other benefits or possibly disadvantages to attempting to do this.

@Brian Dickerson, federal law prevents lenders from exercising the due on sale clause if you transfer the property into a trust for estate purposes, but you must remain as the beneficiary, which means that you also still have all of the liability.

Not only will you find this exercise informative and enlightening, you'll also get an opportunity to understand if that lender is someone you want to work with.

Of course, this is also fabricated but I could easily draft up a lease purchase agreement giving the tenant the option which he would ever exercise. 

The question then becomes: how likely is the lender to exercise that right?

This person will be critical in helping you find the new listing quickly.Repeat this exercise 10 times or so without making an offer. 

What we do look at is how much rent we can get each month, how much of an option for the property we think we can get, how much money will be left in the property after we get a loan on it, how much cash flow we will get each month, and how much of a profit we will make when the tenant exercises the option.  

We've decided to go in a different direction with Property Management, and we're going to exercise our X day notice now with a last day of X.

They exercise the newly assigned option and use their $20K + ($500x36=$18K) as their down payment. 5.

That fee only becomes their down payment if you agree to accept it as such when they exercise their option.