More info is needed. Model your cash flow and consider all of your expenses, such as interest, property taxes, insurance, maintenance, vacancy, property mgt, utilities. Consider the expenses involved in getting your $120k purchase price to your $160k ARV and how you might finance them. Consider expenses to rent the property again when your tenant moves out. Consider when appliances/systems need maintenance or replacement. In the end, you can model your return and decide if the cash flow is worth the effort. Consider your time horizon. You might find it is negative cash flow!
Don't make your model depend on your tenant buy the property from you. Assume the tenant doesn't buy and maybe you are pleasantly surprised. Don't forget transfer taxes and other closing expenses.
In terms of biting off more than you can chew, the real work with real estate is dealing with people and repairs if your financial model works. Only you can decide if you want to maintain another property and deal with a tenant.
You can't finance it to the tenant, or anyone else, if you have a conventional mortgage already on it.
So far I know you are getting 1175 income, but I have no idea of what your monthly expenses are, so I can't tell if you are going to cash flow this property or not.
You seem way too interested in buying a property, than in getting a deal, since the numbers you are passing on have little to do with a deal, and more to do with buying a property.
Unless you have the rest of the numbers, the only important numbers, and have yet to divulge them.
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