There is no reference to where this property is located, so I'll just make a couple general points that may help with the analysis.First, does the lease option agreement indicate that it is binding upon the parties' heirs, successors and assigns (or similar language)?  

So he probably would be pretty hard on us.so if we were building that house for you we would require you pay cash for all those upgrades.. or at LEAST give us 50k non refundable and released might take a risk on the rest as long as the upgrades were in line and the house could sell to another party.. there is an upward limit on price a house will sell for upgrades wont take it over that. 

So much fun and when done right, an opportunity becomes a blessing for one party and the legacy of another.

Definitely have third party management, for all properties.

Are there any requirements as to put the title in my name or funding the loan with both parties or gifting the money to me? 

This means if the REI is sued, the cash (equity) is what's at risk to the REI, but the leveraged part is at risk to the lender.  

Best part is they prefer to lend to LLCs and Incs.

It depends on the party interested in the property but if it's distressed (appears that way) be ready for a low offer.

Perhaps a nice 1950's built bungalow.Always hire a 3rd party property inspector to give you an unbiased feel for the home.

In some states the spouse must carry both spouses debts even if the other party is not on the loan.