If they are leaving mid-Feb and willing to pay 6 weeks' rent to break the lease, that is reasonable. 

Curious about the reason, I consulted my home insurance broker, who informed me that the property had a water damage claim filed a few months ago, which is causing insurers to be cautious.This information surprised me, as it had not been disclosed by the seller.

No...there are many reasons why installing it over the carpet will prove to be a nightmare in a relatively short period. 

I like the property for a lot of reasons. 

We thought about doing seller financing for the $172K but it will likely take 10+ years to pay the full amount at any sort of reasonable monthly payment.

Reason being is that it allows you to invest in other products other than they offer, so that's why they don't promote these . 

If you are assessing all markers you will probably find better but if you have some connections or a reason to be here you can definitely flip here. 

By the way - for the same reason the 1st position lien holder will be uneasy with 100% CLTV, as a buyer I would be uneasy with it as well.

Given the size of the asset, these won't be huge, but something to consider.REWARD - In addition to the benefits stated above, the only other reason I could see doing one on an asset this size is if you wanted to offset a property sale that would have a large capital gains. 

Now, your post also stated Dayton, Ohio - any reason why you want to invest elsewhere?