In exchange, the former homeowner lives in the home until their death rent-free.

I live in CO and my mountain property has water under it but is about 50k to drill, since we plan to rent it we are putting forth the money but also doing a rainwater collection system for the garden (in CO we can only collect up to 110gal)

Prefer not to rent, but open to any other options you can offer. 

The owner has been letting an undocumented family live there and try to fix it up at the cost of the family and charging them rent.

This would increase our company's net worth, reduce our debt, and increase our income.  

Yes, you might make more gross income....but when you factor in the added wear and tear, repairs/maintenace, and increased cleaning fees....are you really netting more money? 

At first I wanted to purchase a duplex as my first investment and was willing to house hack and rent out the other unit.

While duplexes seem like a great starting point, I'm also open to considering fourplexes for potential increased return.Here's my situation:Investment capital: $200,000Risk tolerance: Moderate (willing to leverage, but strategically)Experience: New investor, but I've been devouring BiggerPockets books for the past 2 years!

This raises risk and increases effort required which is to be reflected in rent increases.  

Unfortunately their home was a total loss due to a tree falling, so I have agreed to rent them my STR as a long-term furnished rental while their home is being rebuilt.