Unless there's a reliable way to force appreciation, I'd stay away from this type of deal.Consider how that market is treating landlords with evictions and collections right now.

@Michael Walker, if the wood is pressure treated the construction is solid without rot or corrosion, then have a coat of oil based stain applied to all of the wood.

I want to make the terms of it similar to a hard money lender so they are getting treated the same as a lender I would borrow from.

It helps you (or at least, me) to treat it more seriously.There are also asset protection and tax benefits.

Its not about how bad it is now, its about how bad it can get, and the unfair way its being treated as of now. 

If Spokane has treated you well, you could 1031 into some land and build some new multi-family with the resources you have.

Treat them as you would treat any other tenant who didn't pay and start the evictions proceedings as outlined by your state's law. 

Treat your tenants honestly and fairly, maintain the home, stay out of their business.I've seen many Landlords give their tenants gifts, rent reductions, free rent for Christmas, and other concessions to "keep them happy" and keep them longer.

@Brad RichardsI've been investing in the Rockford area for almost 30 years it has treated me very well.

To that end, I wonder if its better to treat my friend, instead, as a private investor receiving a percentage return; or to structure the partnership as a short-term loan.