IF you want to buy a vacant property, move into it, and rent out your previous home, then you would need to be able to qualify for the payment of both mortgages unless you can provide the lender an executed lease on your property. 

my cashflow would be $128.00/mo 2) Offer shorter lease terms rather than annual?

So we found a property that had great potential for a value add option by building out the attic and adding 2 bedrooms, a bathroom/laundry room and a loft that would increase the square footage by 800 square feet.

I would love to get any critiques or suggestions for improvement on my screening/lease-up process below.

She wants to stay where she is for undertermined of time after closing until her new living arrangement is set and has agreed to sign a lease at closing.

Her lease is set to expire January 1st and we have given written notice that we will not be renewing the lease.  

When their lease is up, I simply transfer their sec dep + interest to my account and then write them a check for that amount.

So, I said "hey maybe let me lease option them?"

Some may prohibit leasing, etc.

You didn’t mention this, but when does his existing lease expire (regardless of the notice you presented)?