Carrying a note, need advice ASAP

[Christopher Livesay]

I'm new to real estate investing. I was recently contacted by my cousin who has a coworker named Tim in the power & light industry here in TX. Tim has been renting a home in Marshall, TX for the past 10 years. The owner of this home lives 2 doors down. The owner owns all 3 homes, which are side by side on the same street. The owner is 85 y/o and is currently in the hospital with dementia and has very little time left to live. The nephew, who lives out of state, has power of attorney and wants to sell all 3 properties. One of the renters is already in the process of buying the home he has been living in from the nephew.  I spoke with Craig about his situation. He explained to me that he has bad credit but wants to purchase this home. He now has a job making about $22 hr and currently pays $300/mo in rent. Zillow estimates this property to be worth about $28K and the property the old man was living in to be worth about $44K. 

I drove to Marshall and looked at both properties this past weekend. The one the old man lived in was built in 1880, has about 1900 sq/ft, original hard wood floors, some antique furniture, approx. 7000 sq/ft lot, but the home is in horrible disrepair. It would need new electrical, plumbing, possibly foundation, roof, the works. It needs it all. The lot behind this home is bigger and vacant. The home that was there has been torn down. I haven't called about it yet but I'm certain it's for sell. My best guess would put the ARV at $85K. My offer on the home would be $7500 and I'm pretty sure the owner would accept it. Personally, I would take much less.

The home Tim lives in is a bit smaller and was built in 1920. It stunk of wet dog, dirty kitty litter box, and general uncleanliness. I couldn't focus much on the floor plan because I was too distracted by the clutter. I don't mean to sound harsh but I feel like I need a tetanus shot. 

I called a couple of contractors that had very good ratings. I wanted to get an estimate on repairs while I was looking at the properties. I live about 3 hours away in Fort Worth. One turned me down because I don't own the homes yet and the other has left for Houston to help with the cleanup efforts after hurricane Harvey. The town itself has 3 colleges and a population of about 24K, which hasn't changed over the past 30 years are so. The market in Marshall doesn't seem to be very hot and this is an older neighborhood with the price and condition of homes all over the place.

My tentative plan is to offer $12,500 on the house Tim is renting. Tim already told me he would buy it from me at $28K and that he would be comfortable making $600/mo payments. I would charge 12% interest on a 5 yr loan. My profit would be considerable but Tim is a bit risky. 

I would greatly appreciate some advice. I'm sure I would learn a lot from this whether it worked out perfectly or not, but I would rather not go back to the School of Hard Knocks again. Would any of you experienced and successful investors touch this deal with a ten foot pole?