What I am needing help with is how to approach the individual and look professional and give them options to feel as if they get options as to how they can receive their money.This is what I am thinking, 100,000k loan , payment interest only annually 5-8% . 3-5 year term.

I would suggest that the second floor tenant approach the first floor tenant and diplomatically address their concern. 

Hey BiggerPockets,I recently received pre-qual letters from two lenders and am now aiming to purchase my first property prior to June 2020.  My plan is to househack a single-family home (Austin, TX).  The area has bee...

Hi @Kesru Tam, I think it is a great approach to break down the differences between to different investment options.

Since you are going to be the new landlord and you need to approach it as such, you cannot be afraid to tell the tenant what you want because you have to remember that you are training them on how you want things to be.

Would they use an income approach?

No further details yet but Im anxious to figure out how others would approach this.  

Finally: is there a better approach or strategy I should consider?

They understand the trade-offs of both approaches.

is not the best way you should approach someone.