Would you pay the commission during the time of signing this lease-to-own agreement, or when the property actually gets purchased?

If your friend want to sell it for $350K, it is because he wants the money in his pocket so to speak and won't want it tied up in your property.Go with option 2 but check with your bank to see if they will lend you the amount and what you need for a down payment.doing a private sale will also save your friend some money as he won't have to pay commission to a realtor.

If it's important to you, don't let your realtor talk you out of it or tell you it will be too difficult- this is where realtors earn their commissions- they need to do some extra legwork to make a deal like this work for their clients, especially bigger deals like this for out of town buyers.

Third thought is maybe they waived real estate commissions, something common if the buyer is their own agent.

You can apply the unit mix (% of Studios, 1, 2 and 3 BD) and square footage of existing product and prevailing rents in the immediate market area for this first pass analysis.Doing this drill should also inform you as to the structure the price, terms and conditions of the purchase agreement which should be your very next step before commissioning (and paying for) a feasibility or any other study, which makes little or not sense to conduct on any site that you don't have under meaningful control.

It’s a great way to sell at full price without high commissions or BS from a realtor 

In Texas if I waited 4 days to submit a client’s offer on a property, I could get in serious trouble with the real estate commission.

Some of the above are even more valid if it's a principal residence where you barely pay down a 30 year mortgage, then sell in 5 years with real estate commissions of 6-7%, only to discover what the privilege to live in that home really cost you. 

Long story short, after commissions, closing costs, potentially paying $1,500 in closing costs for the buyer, etc. we would end up with +-$70k.

I paid our Realtor 7% commission, telling her to offer 4% to the buyer agent.