These would be warning signs for tenant screening, but since the existing tenant was paying rent on his own and she would be month-month with a security deposit, I see this as less risky.

However, unless you created the issue with the title, and you will know it, it would be something that happened on the title before your title insurance was issued, so you would be able to go back to your title insurance to correct it as you issued the SWD based on their clear title statement at the time.It is not a perfect way to insure a title, as the new owner has to rely on the prior owner that nothing occurred since the prior deed, but in the case where you are a principal in the new entity, that is something that I would have no problem with.Relying on a deed warranty, special or general, I believe is risky business. 

An auction is an alternative for them but risky for you in that you may not be able to see inside it before or during the auction!

Flips do work here but can be risky at times.

Should I go for it or is it too risky?

The risk is someone tipping off the county, and then a county building inspector knocking on the door asking to see inspect the property, then finally getting hit with daily fines until the property is brought back to code. 

But, this is more risky for you since they don't have a track record or much experience.

@Matthew Chalfant it is actually far more worth it in central TX because central TX is far more susceptible to foundation problems than the pacific northwest is just based on geology, so everything you can do to mitigate that risk is helpful. 

Where I feel we have risk is if a tenant loses their voucher due to failing to meet the program requirements - due to someone getting a felony or drug charge, failure to report income, failure to meet the recertification appointment, etc.  

Commercial property and Hotels are risky right now.