Is it worth it? $0 property but major rehab and $12k in back tax

[Scott Anderson]

I came across an opportunity to obtain the title of a home for free. The house needs major repairs and has $12k in back taxes according to the owner. He lost the house around 3 years ago because he wasn't caught up on the taxes and it went to auction. Apparently, the person who purchased the tax lean renigged on the contract and the home was placed back into the owner's name. He now has the title on the home, but it is unlivable and will likely be put back on a tax sale. 

The back story is this property was his childhood home. He inherited it after the death of a family member. He was renting the house out for several years until he had bad tenants that did not pay rent and completely trashed the property. He was low on funds and could not maintain the property or pay the $1600 a year in property taxes. The home was put on tax auction and the owner decided to rip out anything of value before losing the home (countertops, cabinets, bathroom vanity). 

The property is a 4-5 bedroom home located in central IL and I am guessing around 2000sqft. Completely fixed up I think it could be worth $80-$90k but the town is in a buyers market and flipping homes is risky since the demand is low. Renting is not a problem and the home could rent for 800 per month as a SFH or could be converted into a duplex and get $500 per unit. (at one point in time the house was a 2 separte units). I walked through the house and came up with a rough estimate of $35-40k to get the house in good condition.

The owner is willing to give me the title to the home as long as I agree to fix it up. He does not want it torn down because it has sentimental value to him as it was his childhood home. He is even willing to help fix it up and has some of the materials like the original cabinets that can be used.

It seems like this could be a good opportunity but I am concerned that I may not be worth the risk. If the last investor backed out of the contract for the tax sale, that seems like a sign that it may not be worth the cost.

What are your recommendations?