Both have gone through extensive renovations. 

Think of it as a business man allowing an unqualified employee to perform work that will have the business mans name on it?

Plus, I'm just not thrilled about forking out 20% when I would rather put that money to work for me elsewhere and opt for a 5-10 percent down payment.So in the simplest terms, if one uses math and logic, we clearly have the means to afford the house, but with traditional financing, the 20 percent will be a bit of a stretch for us.  

Consider any due on sale clause filing an option.Owner occupied, have a mortgage originator qualify the buyer.Do not put contingencies in an option that require performance, like paying rents agreed, it will invalidate the option making it a purchase contract, an optionee may not be required to perform in any aspect under an option.The lease and option are separate contracts, the lease may require performance, like paying rents as agreed.A residential tenant may not be responsible for repairs, IRS requirements.On a 3 year option, it will be better if you were to pay $3,600 as seller concessions to closing costs, she must pay pre-paids under most mortgages.

This won't help you this time but I'm thinking a solution might be 30 day closing, with an extension to 45 days if needed, that way lender will start to look at the file 15 days before closing giving time to get things done. 

@Alfredo Crespo Keep in mind that the lender will NOT allow the borrower to take any money if a short sale is performed.

Got my hands on a couple of performing notes well seasoned and excellent pay histories for 2 condo units in Florida.

Reit's if you look over performance over time tend to be really volatile.

If I add that large expense I could probably get $1200 but that might be a stretch. 

I poked around with it, its a little bit extensive for a rehab, if you're doing 5 fixes a month, maybe.