What ever monies extra you give him for being a nice guy, comes out of your pocket (profit).

A tear down can provide far more challanges, permits, inspections, time and money.

@Kris Haskins We have Historic Commission sign off, and the third floor Building Permit ready to go, now just need to apply for change of use with the Tax Assessors office.

You are correct in that there will be extra closing costs, but the cash-on-cash returns with putting 30% down still looks really good.

The extra wording is not necessary where I am, where a LL just has to wait it out an get the sheriff to do the lockout.

(I spent $4,000 in repairs on my rental last year for an unexpected repair....it just happens and you need extra $ for that kind of stuff!)

Better yet, just pay a bit extra up front and get tailored, advice from a trained, insured, professional. 

It's something I wouldn't think to do unless someone actually told me I could, which you just did...I'm going to get my real estate license so that I can make offers and do some extra MLS searching myself, but I will definitely be in touch with you, you seem like you really know your stuff.

At the end of the day you'll want to balance the interest only cost of the 2nd and its net tax benefits against putting that extra money out of your pocket to get rid of the PMI because money is always financed whether you pay cash or use financing to achieve the removal of the PMI.

I never used the 70% rule, I figured all costs and then added in a minimum profit plus extras for unknowns.