The lease had explicit language stating how to exercise the option, and it seems that they have forgotten to do so and missed the deadline.

this is clearly the fun/storage wars/small-time heist option.i also emailed first alert, the manufacturer, and they told me that if i send them a notarized statement of ownership ($15 for notary) that they'll email me the combination. this way i'll end up with a $120 not-so-safe of my own. i could sell it and make a few bucks or keep it long enough to forget it in a property at which point one of you fine people will buy the place and exercise option 1: attack it with a crowbar. plan is to open it up on sunday. i'll post what i find.

At list at closing. do you have a visual diagram of this exercise ?

When the tenant buyer exercises the Option to buy a few years later, generally that has bought down our underlying financing and we split those profits 50/50 as well.

Probably not but then again, you aren't looking to help anyone out but yourself, and if the owner is too tired or naïve or distraught to exercise any further effort on saving their home or selling it for money in their pocket, better you get it than someone else right?

Perhaps you don't exercise the option until after they pass away, at which time there may be a step up in basis.

The tenant can decide not to exercise the option and buy somewhere else, or we could lower the purchase price, or the tenant could come in with a higher down if they really wanted the house.  

In any case, I'm curious why the hypothetical scenario here matters - what are you trying to achieve from this exercise?

Juggling building my RE career and running my business has been an exercise in time management, and most of that time for the month I've been licensed has had to go to compliance and training. 

So for a house like this one I would offer them $1625/month + T&I and the balance of $351k due on exercise.