So my advice is to use a straight lease and a simple option.Another idea is to use a ROFR, which I discuss on my BP blog ( lease and right of first refusal)

These guys have corporate discounts and purchasing managers that are able to negotiate in scale . 

There are safeguards so people don't cherry pick their own mortgage and figure out a way to knock off some principle and manufacture their own discount.

I would do a JV with with the seller, buy it all cash at say $400K (slight discount of all owned) pay the Realtor 6% of $575 but no money until house resells.  

Most agents are thinking "retail" not deep discounted distressed prices.

I have the opportunity to buy a non-performing note at a discount.

It's called Bigger Pockets : )If you are a beginner, I would suggest you start here to obtain your footing:http://www.biggerpockets.com/real-estate-investingAlso, believe it or not, the Real Estate Investing for Dummies Second Version book is helpful, pretty straight forward, and entertaining to read.  

But the zoning also permits multi-family, straight commercial (service businesses, straight retail, or a mixed use combination of all.As for how it came about... we were looking for residential flip opportunities in the area and happened on this property the day a FSBO sign went up. 

Even at a good discount off of list price, it's tough to get down around $100K.I realize the 50% rule and 2% rule are just guidelines, but most SF properties I look at are coming in at a 6-7% return when I run them through an analysis calculator.  

The core question it seems is straight forward, so I am going to skip over some of the confusion of who is who and who is saying what and what they said.The lease option contract is treated like a rental agreement.