If for whatever reason, you do not exercise your purchase option by the exercise date, they get back the improved property and if there was some positive cash flow, you keep that.Unless you have done this before, get a good lawyer to prepare the paperwork.Oren

If I was house hacking I would not need to put 25% down and I would be able to get a better rate but for this exercise I will use my numbers mostly because I have already worked out my numbers (it is easier for me because I have the real calculations that I have already performed). 

The most important process in REI is the due diligence, so do it as an exercise even if the deal looks iffy.  

Since they are looking for 45k, we were thinking the interest due to the private investor for the 80k down payment would be their back-end non-refundable cost of the option (9.6k). 20-25% of the remaining amount (45k - 9.6k) would come out of the loan proceeds, while the remaining 75-80% would become an unsecured loan between us and Party A payable after closing if they exercise their option to purchase.If they don't exercise their option to purchase, the remaining amount due to them would become payable upon our sale of the home (whether or not we rehab it or sell it as-is at the later time).The tenant is currently paying 1800/mo rent - we would increase this to 1900 and would actually be cash flow negative roughly 250/month for the 18 months).If we ran our numbers properly (and you're still reading this --thanks, btw!)

We tend toward a rosy perspective on concepts which enhance our own career pursuits, disposed to glossing over endemic threats to our success.

You can tell a lot about the agent from that exercise. 

What RE focus do you wish to exercise?

If they choose not to exercise that right then they won't win damages later on for what they could have found but chose not to investigate.Now had they completed an inspection but the defect was not discoverable in such an inspection then they might win the argument.

The clause is rarely enforced, but it does happen so you need to be prepared to resolve it if the lender chooses to exercise their right to accelerate the loan.Simply put, whom ever holds the beneficial interest in the property, typically the owner, has the liability.

Money would go to a lot of cosmetic enhancements))Current average rent per unit: $655  (NOI*2/12months/18units)Raise rents 10% to $720/unit averageNew Gross Income: $155,520Expenses (previous plus $3,000 ?)