THAT my friend is the recipe for collapse.

@Anna SamTo piggy back a few other comments:If one buys real estate with proper leverage, ample cash reserves, and manages the property in a professional manner, LONG TERM the investor is almost certain to win barring a complete economic collapse. 

The biggest surprise I've come across is collapsed sewer lines...

An options contract is a method to sell the property, and he cannot sell the property twice.It may be possible to put in a conditional offer to buy the property if the tenant does not have the money to purchase when required, as the contract could be considered frustrated and collapse. 

or maybe a collapse of the economy, or perhaps the dollar collapses and is replaced by some other currency? 

We found out our sewer lateral pipe under the sidewalk had collapsed, so we got it replaced2.

I presume it will initially just get dropped into whatever checking account I specify... my plan had always been to invest it in a couple of slightly-aggressive mutual funds and let it coast there (we don't immediately need the money for anything), but given the utter collapse in all stocks *and* bonds since beginning of year, there's no real way to select a desirable investment option at this point...So what other options are available for dealing with this situation??

Usually have to re plumb the drain pipes as the older cast iron type of drains will rust on the inside and just keep collapsing and stopping up. 

The property had tons of liability issues such as roof collapsing, unsafe deck, ect.

"home prices are going to collapse.