It is a 2 bed, 1 bath house, in which he is subletting to at least 3 or 4 other people.

If the tenant isn't following the house rules and fails the room inspection then his/her lease isnt' renewed. 

No, I own the house free and clear according to the books. 

I assume the first house hasn’t appreciate much if at all and that’s why you didn’t sell it and take the tax free gain that could take 10+ years to overcome as a rental?

Quote from @Jeff Calcaterra: We have a potential tenant new to the area who has gone through a paid background check, signed a background check authorization form, sent us a LinkedIn profile, sent an offer letter and says he is willing to send us paycheck stubs, but says he doesn't want us to call HR to verify employment because he is supposed to have found housing already.

After a set amount of time, you get the choice to complete the transaction (buy the house) at the agreed price or not buy the house and the owner keeps the extra amount of the rent payments. 

It was an absolute slog full of apologizing for our house when friends/family would visit.

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You do not have the opportunity to look inside the house before bidding so you're buying sight unseen.