I’m planning to buy an investment home that is already rented.

Mind providing more clarity on the asset you are purchasing and the overall business plan with making it perform? 

They did give you info that they love your place, plan to stay forever, and accordingly you should increase the rent $250 per month if allowed by your local laws for the aggravation of dealing with them. 

We also plan to have a performance deed that will help protect me in the event he defaults and the property will be handed back to me.

Material Participation Activities:Property Maintenance: Engage in repairs or construction work on the property to maintain or enhance its condition.Contractor Management: Oversee the hiring and coordination of contractors or handymen for property-related tasks.Tenant Interaction: Communicate with tenants regarding lease agreements, inquiries, or property issues.Property Acquisition: Invest time in property search and evaluation processes, including visits to potential investment properties.Property Management Tasks: Perform activities typically handled by property management companies, such as rent collection or property inspections.Non-Qualifying Activities:Educational Pursuits: Time spent on real estate education or training programs does not count towards material participation.Investor Hours: Hours dedicated to investment analysis, financial planning, or portfolio management are not considered material participation.

I plan to buy, rehab and refinance.

I am under contract for my second duplex, and am thinking it will be time for me to begin hiring out lawn care, as I do not plan to have means to transport equipment between properties or dedicate time to a low value task.

Will they also provide you with comprehensive tax planning? 

And, things will be MORE action focused, more experience based, more "in-the-moment" of the market then some "program" someone developed "once upon a time" to sell to the masses. 

My thought is to approach her by saying that my original plan was to purchase the property and convert her unit into Section 8 so that I could get the $3,200/month rent -- but since she's a long term tenant, I would be willing to forego that plan and tell her she can pay $3k/month to stay.What are your thoughts?