Do you have a list of questions, do you know what you are negotiating for (cash flow or equity)?

Looks like I could make the same thing work out this way:List price from original seller $35,000.00I negotiate him down to $29,750.00 (15% reduction)Down payment of 15% = $4,462.50My principal = $25,287.50Interest Rate = 5%Term on loan = 15 yrsNote = $199.97Below is where the changed terminology comes into play:Price to lease option holder = $44,625.00 (1.5 x my purchase price)Option fee = $4,462.50 (10% of purchase price, goes towards principal in event of purchase, but is otherwise nonrefundable.)Rent = $500.00Rent credit given toward principal reduction = $250 (if payment is on time.)I pay taxes = $50.00 I pay insurance = $50.00 Buyer covers all maintenance and repairs (except for insurable loss)My monthly profit $200.03 (Rent 500 - Note 199.97 - Taxes 50 - Insurance 50 = $200.03)I look forward to any thoughts or comments.  

The bank even let me negotiate a little bit.

Great catch on the roof, I'll be sure and check it out, maybe even get a roofer up there (if I get to due diligence phase) to estimate repair cost as ammunition for negotiation. 

Make sure you understand the contingencies and how they work in your state -- generally you want to do this work after your financing/appraisal/etc is 100% lined up, after the negotiating is 100% done, and after the seller can NOT back out of the deal without the threat of significant financial/legal consequences. 

In my initial email to one of them, I asked for what they charge and he said for single family houses, they charge 1 months rent per year.I own three 4-plexes and he said that we could negotiate the terms.I would like to negotiate fair terms that incentivize the manager to run the property the way I want, which would be to fill units fast with tenants that stay long term and keeping the rent just under market rate.Any suggestions on terms, incentives and things to look out for would be much appreciated!

You're not going to lose your EMD if you fail to negotiate an inspection contingency extension, unless there is something else at play beyond just that. 

With careful negotiations I promised him I would take good care of the property with his supervision and asked him to finance me for 5 years on a balloon payment and with the option of renewing the owner finance loan for another 5 years.

. $400 seems worth it to me, perhaps you can negotiate some of the title fees with your attorney once you go to sell these properties. 

I have had about 5 fires in my investing career and always use a Public Adjustor to help me get what I should from the ins. com.I would never negotiate with insurance companies directly.It is worth the commission you pay to have representation.