I'm of the opinion that only debt that you should carry is the debt service on the property :-) 

America was and is built on small business.. rentals are for when your small business is making excess money and then you invest.. not have limited money and think real estate is going to carry the day.. 

When I contacted the gentleman who was the previous owner of the note and who is carrying back a second, he informed me not to worry and that if this happens, the purchaser of the tax lien is required to notify the lien holder at which time I would have the option to buy the tax lien from the purchaser for the price they paid plus whatever interest rate that county pays for their tax lien certificates.

You will however lose time (making carrying costs go up) and get taken advantage of if you don't find honest sub contractors at every phase.

If she went to Assisted Living - I can help you but it's only KS Specific - each state is different but I'm guessing some of the guidelines carry across states in regards to how she will pay for the ALF and eligibility for Medicaid and Home and Community Based Services (which is a medicaid program that would help pay for ALF)Anyways in KS - in for someone to qualify for HCBS/Medicaid to help pay for their care either in the  home or assisted living - you need to have less than $2k in assets - and consistently less than $2k in the bank - there is also something called a 5 year lookback period - I do not 100% understand how the lookback period works but will soon enough.So - as far as the assets are concerned - if your friends mother has the house and any savings there is no way the govt will be paying for most of her stay in ALF - and I also think it would be difficult to house her in an ALF facility for $3k per month - can be done but tough - Due to no estate planning the family needs to decide on what they are going to do - they will either need to sell the house now and just pay her money down at the private pay rate in a facility until she "runs out of money" then apply for Medicaid and go from there or see if the strategy of renting the house with her present income will be enough to cover the facility she's staying at.Individually the systems are simple however there are so many moving parts to Medicaid HCBS I've discovered in my time as owner of a facility I can 100% understand the families frustrations. 

You will only be able to deduct up to 50% of your AGI and you can carry the contribution forward for 5 years.

well you did not mention the IRA in original post.. carry on !!

I would first verify that he has savings to carry him through any struggles he might have the first year.

If you carry a second mortgage then you can foreclose if she doesnt pay you.

However, it does not always make financial sense to empty and gut the building to carry out a deep retrofit (and even when it does, that initial whooshing roar of capital flying out of your bank account can be unsettling).As of late, we have been purchasing rather, to very, unloved buildings with plans to (eventually) perform deep retrofits on many of them {where the increase in the property performance will pay-back the investment in a relatively short period (say 3 - 6 years) versus the planned hold duration (i.e. 20yrs).