At least for me, that would be way too much risk, what if the exact opposite happens like in 2008? 

I'm loving the BRRRR method, and I think this is definitely the way to go to minimize risk, start with low to no money down, and grow rapidly.That said, I'm finding it difficult to find out around how much you should put down with private money up-front? 

Stepping into a purchase with current tenants can be a lot easier, if the numbers are good.You might look at a HELOC on your personal home, but not until you have really worked through the risks. it would be awful to lose your own home on your first investment purchase.It has only been five months since your home purchase- how is your emergency fund?

@Katherine Weekes Not an expert, but if you hold the property & mortgage in your name, you can be held personally liable & all of your assets are at risk: personal residence, 401k, savings acct, all of your investment properties, etc.This could happen in a worst case scenario where someone dies in your property & the jury awards a verdict beyond what your insurance covers OR if the person dies due to something excluded by your insurance such as mold.

5)  Considering the risks of buying at an auction and not knowing the condition of the house do you guys set a max bid at 50% ARV?  

The numbers currently make sense but we are concerned with the potential Health risks as well as how this could effect us being able to rent the units in the future or selling  the property a few years down the road.

Otherwise it is a lot of risk and effort for not much upside.If you decide to proceed with your plan look at the cash flow projections with a lot of prudence. 

if your plan is to get rid of him, tell owner you want unit vacant by closing. this shifts the risk from you onto him, since a holdover tenant has to be evicted and if this tenant refuses to leave the eviction is on current owners dime.

With boots on the ground where we invest, we understand not only the opportunities in these markets, but also the risks and capital needs of our assets.

The location is extremely high risk as a rental.