We have an offer from a potential leasee on our second/investment property. He will cover the mortgage and 2/3 of the HOA for 3 years. In return, he will sublease and earn all of the rental income from the property. He is offering a 1% lease option fee.

We are new to this and wonder if that seems fair given 1) we will be taxed on his rental monies 2)we will be taxed on the rental monies he gains from the sublease 3) we will be taxed on the 1% option fee. Plus we don't cover all of our monthly expenses (mortgage + HOA) for 3 years.

His lease to us + the rental income he will be receiving may put us into a new tax bracket, right?

Are there any ways to increase our bottom line in this or structure it to decrease the taxes to us?