Being in Ontario CA and not in the USA, there are alot of differences.In the USA, for the IRS (tax office) to consider a lease w option not a disguised installment sale:STRATEGIES TO AVOID RECHARACTERIZATION OF A SALE IN THE USA:Where the parties want to avoid having the lease/option recharacterized as a sale, the overall planning strategy is to avoid or minimize indicators of a deemed sale as follows:1.

Most issuers that do any volume will quickly blow through $500k, which is the threshold to avoid audited financial statements.  

If you guys paid cash for the property & want to avoid borrowing funds, but need money to pay the contractor & start producing income, then you could possibly do a lease option (aka rent to own) allowing the tenant/ buyer to choose design elements or have input on the design (so that they feel they're getting some kind of customization & added value), this would be of course AFTER collecting an NROC fee, (Non-Refundable Option Consideration - not a down payment but gives them the right to purchase at a future date - usually 3-5 yrs) typically anywhere between 5%- 10% of the market value of the property.

@Tim Jonasson Wow I have always avoided land leases, but I didn't realize the holder had so much to gain at the expiration of the lease!

At the end of the 5 years we can either modify and avoid closing cost all together or refinance back into a 30 year fixed.  

I plan to stay in the house for another year to avoid capital gains taxes when I sell.

Would like to avoid hard money.

Specifically I am immersing myself wither literature pertaining to buy and hold and am striving to avoid analysis paralysis by offering soon on a property I have had my eye on and jumping in to the the business of having tenants.   

In other words, how to smell and avoid "shark" private lender(s).  

I would like to put this in a 1031 exchange so that I can avoid the CA 40% cap gains.