I need some ideas, on this lease option...

Ok I am working on a Lease option contract and here is how it's structured.

total amount owed to bank: $175,000.00
Curent FMV $131,000.00
monthly payments on the property: $1,347.00
yearly taxes $4,000.00
yearly inssurance $2,000.00
sugested Rental Value $1,100.00(in its curent conditions)-$1,500.00 per month (FIXED UP)

here is what I offered on the lease purchase option

5 years term
monthly payment of $1,100 per month, seller pays $247.00 difference
No money due at signing from buyer.
Seller payes taxes, and insurance during this term, and keeps all taxes benifits.
buyer can assign, sell, rent, lease property during this term.
500 dollars monthly for fixing, out of buyer, anything over 500 seller covers.<---(Seller wanted to do this)

After doing the math, in 5 years when I am due to purchase the property there will be a remainder balance of $125,000.00
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One more thing that the buyer wants is:
since we do not know what the equity will be exactly in 5 years on this property, he wants to get some of the equity back, but I do not know how I can go about doing something like that.
ofcourse that in five years I will want to sell the house and pull out most of the equity.

My plan was to rent the house out for 2 years after putting 1500 in repairs to bring it's rental value up to 1500, and cash flow 400 per month. after two year rental I would do a sandwish lease and sell it for about 170,000.00.
but now the seller is telling me that if there was something in the contract that at the end of the term he could get some of the money back he would be putting into it for the 5 years, he would do it. on his calculations he said he would be putting over 40,000.00 in five years out of his own pocket.

he's Ideal situation would be for me to pay for everything, taxes, insurance, full payments. If I ad all those numbers, I would be a little over 1800 per month and that is not worth it for me.
Even if I decide to pay his taxes, I would not be able to claim it in my taxes, we would be breaking the law (S.A.F.E Act Enactment)
the only way I could claim taxes is if he trasfered the title, but since I have not yet purchased the property transfering the title prior to me actually buying it would be illegal!

either way, in order to agree to this contract he wants me to put something in the contract that stipulates he gets part of the equity back so that he can at least get something back that he payed throughout the five year lease term.

What do you guys think would be wise to do in a situation like this?
this deal is almost a done deal, however I do not want to create a win loose situation for either party.

Ps: buyer is waiting on the person who is renting his property to leave, so that we can finalize the deal, they should be out by next month.