Your note model I get why you want to do it.. but its just on the extreme far end of risk for the investor.. no one in their right mind would buy those unless they are your relatives or friends or someone I guess who takes a liking to you personally.the way I look at it and underwrite it  personalities and such aside I am sure your a great guy with great intentions.But here is what I have seen you post.1. you buy a property and put a normal first on it.. you or your investor puts the cash into the deal .. that's great.2. you lease option it to a buyer or rent to own buyer.. now again your new to this so you have no way of knowing how many if any of these will actually buy.. my experience of doing this the last 30 years and have done probably more than 50 lease or rent to buys is VERY very few will buy..

@ Angela HolmesYou are at the right place and your relative will be happy to see you are building with her gift instead of spending.Perhaps out of CA  d/t tax implications?

If you buy your relative’s house for $130k-$140k and put in $10k of updates, make sure to get a Broker Price Opinion (BPO) and/or a formal appraisal to show its true value.

Tax assessment doesn't determine resale for the house however as it stands lets assume your relative is underwater on her mortgage or else she would just sell outright and pay off the HOA and her current mortgage.

Hopefully you have a written agreement with your relative.   

If you do you will quite possibly lose your freinds, and/or kill your relative.  

If you can increase the rent enough to get a good return, then perhaps it is worth keep but I doubt that will go over well with your relative

Use your relative’s money for the down payment. 

Definitely be there (and if it's your relative buying the house, maybe they can be there too).  

Having a low basis point for this and getting good rental income from your relatives would be a nice way for a long term rental.