I'd encourage you to consider a variation of both #1 and #3 immediately.  1) Use FHA loan to buy a nice house to live in that does not need significant rehab.   3) Buy an investment property but spend some time learning how to buy them without 20% down.The reason for #1 is if the house is in good shape, you can save up the monies you would spend on rehab towards a future rent property.  

Motivation comes in all shapes and sizes!

The property is in really bad shape so if help him get a quick sell..he can get out of a house that costing him instead of making him money.

Those are the "big three" that drive income real estate, and the good news is those trends typically shift slowly--especially population movements.  

I think your 20% for Capex/maintenance are pretty high, but you are going to want to keep things tip top shape to be an attractive option.

Hows it trending, Future development or growth projection.

@Bjorn AhlbladThe roof is in good shape and each unit has a separate water and electricity meter.Each unit is 2/1 and there is hook up for washer drier but the actual washer drier is not provided.

IMO, a TK provider who opens up shop in a new city that they do not live does not have the experience necessary to truly known the in's and outs and historical trends within neighborhoods. 

Many properties I see (SF Bay Area) would be cashflow negative at purchase even just on PITI and not accounting for repairs, capex, etcReal estate in California has always appreciated, but its not always just a straight line up, like any market there are peaks and troughs with a general trend line up.

They may shape up for a bit while they figure out who you are but they are likely to get right back in the red and it may come quicker than you think.If they are not 100% by the time you close, I would collect their first month's rent (make sure it's good) and then serve them notice to vacate.It's common for new Landlords to say, "I don't care if they're bad tenants because I'm getting such a good deal!"