There are many reasons to use a servicer or payment service, such as an owner moving and leasing a property, while a new payment arrangement is a red flag of sorts it doesn't send up rockets of red flares.

Are there flaws or pitfalls I need to think about prior to arranging this?

You might be able to arrange something with a friend or family member.

At this scale, you need legal assistance, this can be done with a master lease arrangement and you can also secure your interest as a future advanced note/obligation agreement to cover additional money invested on repairs.

Certainly, arranging for tenants to pay utilities would be a big plus (but the rents might need lowering a bit at the same time)?

If you don't have the cash, find a partner and arrange a split. 

Is there a way to arrange a private deal with the retiree and pay him back directly over time if he agrees?

If you and your friend would like to arrange a meeting or connect with me, then please let me know. 

There are also new laws concerning those who have received notice, no more "I can help you" arrangements or interfering with any foreclosure process, banks don't due lease purchase deals.

Accepting any payment that reduces a sale price is a financing arrangement under Dodd-Frank.Your first one, have your attorney do it or at least review it before you execute anything.Good luck :)