A lot of people say to go for the 2% rule, but here in New Jersey it's more like 1% unless you find someone distressed and you put a good amount of work I to the property.

Those rules might be a hair different.

It seems counter intuitive, but the larger banks have more strict rules because they are working for the share holders.

The 50% rule doesn't apply so you are going to have a higher cash flow because you aren't going to be spending 4200/mo in expenses!

You might get the $5-10k up front as a down payment but that could be eaten up by these repairs/lost rent.In the long term you might make a few more bucks, but the risk is much higher and you have a downside to potentially have to put cash into it to get rid of it, whereas you know your downside with the wholesale deal is $0 if you don't close it.Also with the new Dodd-Frank rules in effect, make sure you understand how those might affect lease options before you jump into one - there are many well researched threads on BP addressing DF right now .

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I'm also not sure how any new Dodd-Frank rules may have changed this.

Source documents are needed to show and justify all entries on any settlement statement, documents are to be retained for three years as well.I would be suspect to any closed sale transaction accomplished without a sale contract, that being so unconventional I can only think of the justifications for not providing a contract would be to withhold details of the transaction. :)

Are you going to include the note inside the 1031 Exchange, which sounds like you want to so that you can defer all of your taxes, or are you going to exclude the note from your 1031 Exchange, in which case it would be taxable under the installment sale rules.

Nevertheless, in response to commenters' requests, the final rule provides a non-exclusive list of methods that issuers may use to satisfy the verification requirement for individual investors.The methods described in the final rule include the following:Reviewing copies of any IRS form that reports the income of the purchaser and obtaining a written representation that the purchaser will likely continue to earn the necessary income in the current year.Receiving a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or certified public accountant that such entity or person has taken reasonable steps to verify the purchaser's accredited statusThe underlined/bolded item above leads me to believe that this guidance is only for reference and one can do their own, independent process provided it is reasonable.