Hi Rosanna has a very good outline above.

@Jacob JudahI personally recommend not doing this for several different reasons, many of which are outlined in this thread HERE.However, I definitely recommend house hacking with a duplex - just live in the other unit! 

It's a breach of contract as there is a failure to perform.I would give them one last chance to perform (with the threat that you are putting it in the hands of your lawyer) and then take legal action if you feel that strongly.I spoke to the closing attorney and asked her to send a letter outlining the breach of contract with intention to take legal action if they fail to close.

I believe the IRS has a document that outlines what's considered capital and what's not.

I hate to ask on my first post but I was wondering of someone could give me a detailed example of how to determine whether a property is a deal or not, essentially an outline of things to do before you put your name on the dotted line?

You might also want to make a business plan outlining the project including goals,etc.Also take into consideration a mentor in your area.

So I'd say your lender is pretty much right in line with the average.And with all that being said, with the deal as you've outlined it...

You follow the process as outline by your state landlord tenant regulations.

I will start doing some blogs that can outline some of these issues, if people want more info, they can contact me.

As outlined above, arms-length is the way to go (it looks as if you've learned about this as well) because all the banking rules are cut out and the lender actually becomes the bank - setting terms (full payout on sale of property if shorter than 1 year term), interest rates (any agreed upon rate), and even the maximum funding - up to 100% ARV if they are willing to take a larger risk.