If I am looking at this deal purely based on numbers, you can definitely find some better.

This is purely a speculation play for equity.  

If you plan to pay out the cash (or if there is a risk of having to pay out the cash) within a year, then this is where that money should go.My "operating cash" relates to pure overhead.  

I saw that you're including your own rent savings, which is fair, but I'd also consider if the purchase would cash flow if it was purely a rental.

(Pure option combined with lease to make lease option)Perhaps putting something in the contract along the lines of: (Illustration purposes only)- Seller shall give to purchaser a concession in the sale price of ______ for closing costs.Then when the buyer goes to purchase the home, that concession MUST be written into the sales agreement.That is how I think it will work...but then again, I've been wrong before.

@Karen Margrave purely inquisitive.

Even if you are going with purely seller financing you should go to a bank to get their take on it in case you ever need to refi.

I think your pure cash flow (cash after expenses, repairs, capex, etc) will be too low if you decided to rent the property just to find another. 

Looking at this from a purely business perspective, it's certainly the right thing to do. 

I have some non-finance reasons for buying this house (to provide housing for one of my adult kids), but I'd also like to evaluate the deal on its own merits, so if we don't end up using it for Adult Kid, I will have a good feel for whether this was/is a decent deal from a pure financial position.