Sorry to hear you troubles Nate.I CRINGE when I always hear an investor say I bought a "turn key" investment.So far I have never heard of one turning out good but I am sure one exists.Those kinds of repairs costs can be normal.Especially if you have an older property that is being rented out more things will go wrong on a daily basis and it will be more management intensive.The item in your management agreement I am sure will be deemed and enforceable part of the contract unless it is deemed "vague and not descriptive and un-enforceable" by a court of law.Often these "turn key" investments are not deals at all as capital reserves and upfront repairs are misrepresented.I equate it to "lipstick on a pig".

I have recently considered refinancing out of my FHA down to a 15 year fixed which would equate to what I currently pay for my 30 year FHA along with my home improvement loan.

I'd run away.Figuring 50% expenses, his $4,000 of income equates to $2,000 to service debt and have cash flow.

So if you find something with $30k in equity that would equate to roughly $4500 for a wholesale fee.

Why not simply get the home appraised and do an FHA at appraised value, giving the bank 3.5% down and completely eliminate the owner from the equation?

In a tight money environment, the chance of a lease option working out for the buyer is not very high; when declining property prices are added to the equation the chances of success for the tenant-buyer are real low.

And if you're moving, you need to calculate the expenses (either way you described) into the equations.

And I thought maybe there was a semi simple math equation.

This indicates an expense ratio of about 33%, which is extremely low unless you're doing the property management and maintenance yourself (in which case, you need to factor that time/effort into your equation).The reason your expense ratio seems so low is that you have just rehabbed a couple units and just started filling vacancies.

Removing emotion from the equation will help you develop a more pragmatic approach.