The issue I see is that you are essentially paying retail for the lot and not leaving yourself with a margin of safety.  

If we complete a Lease Option deal, does seller still pay their original mortgage, while I'm essentially paying that off with my rental income?

Unfortunately, I have seen many friends and other investors have to dig out of a hole because they stayed too long.I am currently taking some chips off the table by selling one of three large apartment buildings I have in the Dallas area and exchanging the payment of a hefty amount of tax In order to receive a hefty amount of safety and security.Good luck on your decision and you are lucky to have one....

Moreover, performing notes do not give you a great deal of a discount for the very reason that I mentioned above, they offer safety with passive and steady income.

No, what you primarily need is adequate insurance coverage which you would need in addition to a LLC anyway.A LLC is primarily a psychological safety net as opposed to actual.

It's essentially an un-recorded land contract.  

@Blake KingFor a short term goal such as your savings goal, you want safety and liquidity over return.  

@Joe KoppelA portfolio lender is one that doesn't necessarily follow Fannie or Freddie guidelines; essentially they make their own rules.Exhaust the conventional lending side of things before going with a portfolio.  

Wondering whether or not the "holding costs" of PITI can be included in the loan... essentially using the renovation part of the loan to not only pay for the construction aspect but to also pay the holding costs while the renovation is taking place.

I closed on a MF a few months ago with 15% down and managed to add a HELOC for an additional 5% so that it is essentially 10% down.