Seems to have much lower hoa and with a good community pool exercise area.

Unless you have behind the scenes info, the liklihood of a deal here isn't worth the time you're investing trying to figure it all out (unless you're just doing this for mental exercise that is).I suggest you come up with some sort of threshold/prelim test to filter out these type of situations and focus your time on properties that are more profitable and more likely to be sold at the price you need.Time is your most valuable asset.  

To get an idea of this without going through the brain damage of this exercise, are there others doing this in the area?

For some that appreciate the immediate exercise it isn't a big deal, but it does immediate limit my tenant base to those that can take stairs.  

Your main concern here is to make sure the bank doesn't get spooked and exercise the "Due on Sale" clause that is included in every loan that says if title is transferred, the bank can call your loan immediately.

That is still to be determined, but we have decided that we will exercise our option; it's just a matter of how at this point.

What about locking it up with a purchase option, finish it enough to qualify, then exercise the option and purchase with conventional financing?

NOTICE: If Landlord fails to repair a condition that materially affects the physical health or safety of an ordinary tenant as required by this lease or the Property Code, Tenant may be entitled to exercise remedies under §92.056 and §92.0561 of the Property Code.span>If Tenant follows the procedures under those sections, the following remedies may be available to Tenant: (1) terminate the lease and obtain an appropriate refund under §92.056(f); (2) have the condition repaired or remedied according to §92.0561; (3) deduct from the rent the cost of the repair or remedy according to §92.0561; and (4) obtain judicial remedies according to §92.0563.

A landlord has a duty to exercise reasonable care to guard against foreseeable dangers arising from use of portions of the rental property over which the landlord retains control.

Plus, those tenants tend to exercise greater care of the flooring (and home in general).