Besides buying a tear down for too much on tax deed I wonder what are the other big risks to look out for? 

I would do research on painting or covering that before I’d tear it out .

They will depreciate the property based on age, wear and tear, useful life left, etc.

I find out the price builders are paying for lots or tear downs, then put the lot under contract for less.

Do I offer to fix things now but explain that I will be billing them because the damage is clearly caused by them and well beyond normal wear and tear?

Reposition, tear down rebuild, add other buildings etc..A lot of things to consider Good luck

Purchase price: $95,000 Cash invested: $55,000 Sale price: $215,000 Pre-foreclose, elderly person living in the house in a extreme poor condition , we offer alternative for his living , We help the owner with a better place to live , we help the bank by giving them Money for a deal that will take a lot of money to be back and functional , we hale the neighborhood by eliminating a house that was a close to tear down and in a bad shape , What made you interested in investing in this type of deal?

If you tear down to the studs, claiming it is ready is difficult to defend. 

I've heard of people doing this, but does anyone have a clause in their lease that says they'll essentially tear up the lease if the tenant purchases a new home using the landlord/realtor? 

Let him know that the extra money is to offset inflation, wear and tear along with rising taxes.