Often times, the more you learn, the more fear that creeps in and the harder it becomes to act.Good luck!

You need to have some reserves for repairs vacancies etc.If you are not able to obtain long term financing from the owner I would be fearful that in 6 months you may be unable to get your new loan. also, consider that if you go to get a new loan you will have closing costs that will require cash unless the owner is willing to pay your closing costs as well.You need to get concrete numbers and start putting them together in plan. sounds like you are in the beginning stages of planning. please make sure you have a solid plan with realistic numbers that work before committing to this property.I hope this helps.

My fear now is that these guys decide its not a good investment and dump everything.

I may be in the minority but I avoid scratch and dent for a rational or maybe irrational fear. 

So I do have a great deal of fear with the area, but I know the rental market is thriving there due to community college and the demographic.As far as my owner occupied property - $329K with an annual operating expense of $13K, taxes $3000, insurance $1000.

Also my other fear of interest only is if you dont stock pile cash for a refinance instead of new acquisition if rates rise you may not qualify for a refinance.

She has been there for three years and is never late on payments so I prefer not to give her notice.I was thinking I would offer her a year lease (with a deposit of course) at slightly less rent to ease her pain/fear of committing.

Given your lack of reserves and poor credit which would make it difficult to get any money, I would be a little fearful of getting into too many properties that didn't cash flow right.

Sadly, I fear it's true.

If they have a steady job and pass the general tenant screening criteria items, and not having a SS make them somewhat fearful of authorities (cops and courts) -- generally excellent low hassle tenants that pay cash and on time from my experience.