Looking at the deal, I have two main initial concern/opportunities I don't have much experience and I'd appreciate any input/advice:seller broker marketed implementing Water RUBS as one of the upside (actually factored into NOI proforma in which asking price is based on).

I will use your method. 

Hi Brendan ---Most Lenders use the Build First method with 3 even draws.

The hard money lender will still analyze the deal but they are more concerned on the refinance step to make sure you are good. 

I suppose this could happen with any seller regardless but I am also concerned given his age and ill health, what if at the time of purchase his interest in in probate or held by surviving family? 

What is your specific concern: the smell will bother other tenants (if multis) or that it could turn into some sort of drug lab?

If they're concerned I'll lose some or all of the account value at the same time as I default on the loan, they could roll the contribution money into an identical account at their institution where the only investment option is cash (or whatever they consider safe enough). 

Yes I have considered the rent to own method.

It is also the only method of finding those recently vacant rental properties that the owner might be willing to sell while it is vacant. 

I know that the method I mentioned is riskier and not in any way ideal, so hopefully, all this due diligence will pay off and the next deal won't have to be like this.