I had time on my side plus rentals with a very nice cashflow to pay for under performing properties .  

BP has some really good podcast about how much money to put into marketing which runs around 1,500 to 1,800 a month for consistent deals.

In regards to your concerns, you should put together an MOU regarding the terms of your agreement with performance clauses protecting both parties, and eventually lead to a JV agreement.There are several other methods to protect yourself as well as the owner/seller, however, too lengthy to write about.Don't be too greedy, otherwise it will limit your relationships and longevity. 

I'm a small fry compared to B2R and such... and the reason my two flippers use me consistently is because there's no paperwork involved...

If you do not perform, they'll just move on.

Perhaps the question would be, based on the described circumstances, how do you convert a non performing asset such as this into a performing asset?

In my opinion, CAP rates and NOI are a great way to compare properties to each other you're when doing business with other investors, but Cash on Cash is a great way to see how one property will perform for your personal operating assumptions, compared to the next.

The note was non-performing so the bank sold the note off likely at a good discount.

People can say what they want I've negotiated down to $5,000 for a non-performing assets. 

While you may be exempt from the DF Act, you are still subject to predatory lending issues, too much financed, over priced property, borrower placed in a position where they can not perform, lacks ability to pay, and other matters may apply.