Is there any legal restrictions?

Your option may be limited to gifting him the cash for the down payment...the decision to lend will be based on his DTI and credit...and using FHA across state lines will prove challenging unless he's taking a job nearby...plus you have minimum 12-month owner-occupancy requirements, so you won't have a quick deal here...you can apply for a streamline re-fi sooner than the 1-yr mark...There is nothing wrong with using an FHA insured loan to get into a live-in investment, but the restrictions are tight...trying to use federally backed loans for unintended purposes will likely backfire...the fines are hefty.

You don't own the property, you own the Option.Read the agreement to see if there are any restrictions for the Option Agreement but I can't think of any off the top of my head.

Looking for something that would restrict subleasing, possibly put a cap value on landlord-supplied utilities, and be a general short term lease for the property.  

It is my understanding, and that of at least some of my colleagues, that the tax reform removed this restriction, and the IRS publication has not been updated to reflect it. 

(You probably can take bonus depreciation as there is no such restriction) Also, your business needs to have net income to take section 179  deduction.

I will be putting a section in the lease about living in a historical house that states the house has historical features such as this banister and landing that has a gap of more than 3 inches between the posts, the current standard, and that a child could put his head through the spacing, and that the banister height is lower than is currently used for fall prevention.Other things that are not historical such as putting in the GFI outlets by the sinks, I just do for the safety factor. 

I have been focusing a lot on North Collinwood (a neighborhood in the city of Cleveland proper), but I also have properties in Cleveland Heights, Euclid, Bedford, and Garfield Heights.

I will say from a leasing/management perspective, we have seen a huge uptick in interest and quality of tenants in the last year in areas like Brentwood, Brookline, Bellevue, Avalon, Beechview, Brighton Heights, Millvale, Sharpsburg, Swissvale, Carnegie, and Carrick. 

HiI'm looking at purchasing a multi-family in the Creston Heights area of Grand Rapids.