They give you a detailed list of everything you need to fix then you get to work.  

Always do the math analysis and try to look at your prospective properties before you make an offer or at least have a clause that will protect you for some time (usually about 15 days) to make a detailed inspection and possibly back out of the deal without a penalty that will hurt you too much.Right after you close on an improved property get an insurance policy that will protect you if there is a loss.  

I'm sure there are small details I'm missing but is the overall concept right?

Basically, you take on a massive amount of extra risk, courtesy of the Ontario Govt.I would consider it to be a red flag if they suggested that the checks will come straight to you.

Had I mortgaged it, I would have had a bunch of extra cash then for several other properties.

Is it better to pay extra toward your principal portion of your mortgage per month OR is it better to save for your next rental property?

Great way to learn while not spending any extra time.Hope that helps!

@Matt MotilCongratulations Will you give us some detail on the house from an investment prospective? 

The sellers also needed to find a new home to live in so the extra time benefited them.My two cents is to not be discouraged about your offer as you do not know the seller's situation and the contingencies on the other offers.  

Let me know if you'd like more detail or to chat more, I know my response was fairly generic.