Also there are a handful of San Francisco Bay Area BP'ers who have started meeting informally to network and exchange ideas.

Offer to look at properties for them in exchange for him/her teaching you how to evaluate deals, estimate costs, etc.

Besides the normal precautions with having a tenant do work in exchange for rent, would you advise installing granite in a rental?

The only way around it is a 1031 exchange.

Require a minimum 60 days from the time they excersize their option to the time you close and use that time to find another investment to 1031 exchange the capital gains into another property tax free. 

At the same token I agree I dont want to be friends with her and exchanging cooking recipes... ect @Tim Crosby I see your point as well.

We unfortunately never got to the point of writing up a contract just exchanging e-mails for scope of work agreed upon ace verbal agreement on price.

Mike thank you for being so precise. 

I am trying to dive deeper and any insight you can provide is precisely what I need from someone who experienced the downturn directly and obviously not only survived, but thrived. 

@Nick Hedberg, To successfully complete a 1031 exchange you must use the services of an unrelated party called a qualified intermediary.