@Austin Hughes  feel free to offer the seller moving money, and a split of the proceeds if you plan on selling, but do not allow her to remain in place, because that will not serve either of you.

I am planning on using creative financing through personal loan (60% sale price) upfront with owner financing the remaining 40% for 10 yrs.

If I used it to fund the whole $35K ($23K down payment + $12K rehab), at a 4.5% rate (I'm not going to assume my HELOC rate will remain at 3.99% throughout the 15 years), that's $268/mo.NOI minus financing = $371/mo.This is a B class area...a good location with an average school system.For the sake of this thread, let's assume the rehab amount, ARV amount, and rent amount are correct.  

So, no don't tie lease performance to an option, unless you want a sale contract and that carries different interests conveyed to a buyer.Actually, the value of an option isn't based on the remaining option fee paid or an amortized amount being consumed over time.

. $14,000 but the income will be impacted slightly and the value will not increase.All and all, we are a little stuck in not knowing what to do while reno/upgrade costs keep raising and the sale price remains quite high for the area.

So he doesn't need all the money right away, but I'm not sure there is much of a tax advantage to getting all the money now as oppressed to a small percentage now and then the remaining balance in no later than 6 months. 

Then itemize these expenses and share those expenses as well as the remaining deposit back to your tenants before the required timeframe for your state.

@Spence Rodman My perspective is different, when I look for land, any remaining slab is a liability and I reduce the the value of the land accordingly based on my cost to remove the slab.Around me, slab removal would be $5-10k, assuming your talking about a 1000 to 2000ft2 slab.  

If there is any doubt about it being able to remain in operation then you need to walk, with one exception - if there is public sewer at the road already.  

You can have more than one VA loan, but the max guarantee amount remains the same, and each loan goes against it.