Since I'm not a big enough investor to buy 20-30 properties at a time, I've had to resort to this tactic when the deal is right.If you're wanting to do a prelim title search, your title person can do a quick search for very little time and money (maybe even no charge if you're a repeat customer).Since I'm not an attorney, here's what my interpretation is.

Unless you are an attorney you do not want to interpret the law because it can come back on you that you pushed your view of the lease and the law and made them to think a certain way.He advised to give them the lease and just simply give them the option to take it to their attorney to review.

That's puzzle piece number 1.Puzzle piece number 2 in the 1031 exchange is your reinvestment requirements - in this case you sold for 500K so you must buy for 500K.Puzzle piece #3 is that you netted after mortgage pay off 100K in cash - So you must use all 100K in the next purchase or purchases.So now just run the scenarios - your potential tax bill in CA on 100K of profit could easily be  30,000 or more.If you do a 1031 and buy for 500K and use all 100K in cash then you would pay no tax.If you do a 1031 and buy for 400K then the IRS perceives that as taking 100K in profit called boot (yes you might say that it is a return of capital or whatever but they have nuclear weapons and you don't so their interpretation wins).  

To extract money out of people who interpret things differently.

., 119 Ohio St. 3d 506 (2008) to determine how broadly the second prong should be construed and to reconcile various interpretations from several Ohio appellate districts.

That is my experience.Here are my responses to (my interpretation of) your points-1.

Lease Options are much more restrictive now, and many will tell you to simply avoid them, going instead with a Right of First Refusal on the lease.The reality is that much of Dodd-Frank is still being interpreted.  

If you want to wholesale, I interpret those Rules to mean that it would be up to YOU to fulfill the Sub2 requirements, not your next Buyer! 

Now, you can take that information and interpret it anyway you want. ;-)

That added scope pricing needs to be separated from the base scope of work.I wish I had a clean, easy answer for you, but this sounds like a bit of a mess.My contracting experience is commercial, and we have a very detailed scope of work which leaves little to interpretation.