You wouldn't know it, though -- few banks actually offer the program.To purchase and finance a home through Fannie Mae with more than 4 existing financed properties, investors must meet all of the following criteria:Own between 5-10 residential properties with financing attachedMake a 25 percent downpayment on the property; 30 percent for 2-4 unitMinimum credit score of 720No mortgage lates within the last 12 months on any mortgageNo bankruptcies or foreclosures in the last 7 years2 years of tax returns showing rental income from all rental properties6 months of PITI reserves on each of the financed propertiesFor refinances, loan-to-value is capped at 70% for all property types

They have no seasoning for a foreclosure / bankruptcy / short sale, higher DTI's, unlimited number of financed properties.There's another lender that does focuses on non-owner occupied properties and offers no income documentation.  

They also have full bankruptcy protection which is important if the company goes bankrupt, since you don't want your money to be in limbo or lost.

Should I market to newly filed BK's for lease option on their property or should be a regular purchase down the line?   Is this a bad idea?

Welcome to the site @Prima ServYou should contact an attorney to create an LLC along with an operating agreement that outlines shares, profits, duties, contributions, triggering events for changes, what happens in a death or bankruptcy etc....

Correct me if I'm wrong, but what I think @Wayne Brooks is saying, is that the borrower does not have options like "Keep your Home" or bankruptcy, because the borrower is deceased.  

The same individual who lends money to an investor for a real estate deal can end up spending a great deal of additional money if he needs to foreclose, if the borrower files bankruptcy, if he gets the property back in disrepair, if the investor does improper or noncompliant improvements to the property, if tenants damage the property, if the county condemns the property, if there's a title issue and the title company doesn't cover it, and about two hundred other things that can go wrong.  

If you have a principal who is on the edge of bankruptcy and he has a business loan application that has a dCR of 4 to 1 that will go away in any bankruptcy if he has ownership of the business, his stock or capital can be at risk.Other considerations are the abilities of management in a commercial loan, the owner's ability to make things happen as expected, the credit report is a good indication of individual professionalism and responsibility.So to say it doesn't count is not quite right, it counts, but the first test is the DCR and that is waht will show on processing docs.

The tenant could file bankruptcy, and the owner could be dragged into this because of the upfront rent the tenant paid.

The background check shows that he has a previous eviction filed in Aug 2009 with amount $0 on the judgement, and a bankruptcy filed Jan 2009 (claimed May 2009).He has been renting a house after 2009 to today with good paying record (checked with his current landlord).