The option money usually is counted toward the purchase price if the option buyer does choose to "exercise" the option and buy the house.A key difference is that a land contract (aka contract for deed) buyer has an actual equitable interest in the house.

@James SyedIs the building performing?

Can't recall a seller disappearing, they may not answer calls.Two options; walk away or sue them for performance.

If the contractor doesn't perform do you have the capability to finish the project on your own?

The best performers are ultra short term strategies, such as statistical arbitrage (that what I do).

Has anyone used a "Performance Clause" with their contractor, whereby there is an incentive for finishing early and disincentive for finishing the repairs later than specified on the contract?

Another example, Glimcher is one of the leading performers among REIT's at the moment.

We will be requesting information on each of the residents, so that we may perform background checks...etc.

Most Realtors assume market performance and begin at the neighborhood, I'm guessing investors do as well.

@Brandon Turner good points on the duration and I will try to lengthen the terms to 12 months with the ability to exercise the option anytime during that period.