New Rental Properties - Nervous

[Jill Williamson]

I am finally making the leap and will be aquiring 2 properties in need of DEEP rehab. The previous owner has someone living in 1 of the properties in unlivable conditions (the back room is 2x4's with holes in the prop). The previous owner told me this was a tenant, but I have now found out that this person has lived there for free this entire time on some verbal agreement that they had. The previous owner has told me this person is willing to pay rent, but here are my issues - 

I want to rehab this property to at least make it liveable. Apparently this person that is occupying doesn't have anywhere else to go Im thinking. I don't know whether I should just let them know (or even if I can legally) that they have to leave or not. Also, even if I let them stay and they began to pay rent--no one should inhabit the property in its current condition (I don't want to be a slum lord or do anything illegal by allowing this person to stay in the property). 

I am confused on what to do or what I can even do legally in this situation.