My parents had a lot of outstanding bills - many of them accrued while my father was ill (medical bills, etc).

Accent counseling drug rehab, sleep clinic, medical, etc.

Usually, the pre-rental medical screening tests that you put your prospective tenants through would have caught this and any other undesirable diseases they might have. 

That deal we had also used an escalation clause to be sure to beat other offers in a multi-offer situation, but there weren't any to exercise the additional $2500. 

This is just the cost to buy the Option Contract.3 - The Option Contract = Gives the exclusive right to buy the property over a specific period of time.If the term in the Option Agreement runs out, and the Option is not exercised, the Agreement is null and void.The 4th Contract should only come into play if the Option Contract is exercised...and that's a typical Purchase agreement.The REI makes their money on the spreads between the similar contracts, and at no time should the REI ever be spending more money than the OC and the first month's rent...and both of those costs should be recovered from the end tenant/buyer almost as fast as the REI spends it. 

Also, private medical practices are a dying breed.

@Michael TaylorThere are several lenders that specialize in funding real estate tied to medical marijuana.

Also, you would need to have everything in writing, decide on who takes care of maintenance (new roof, broken appliances that sort of thing), what to do in the event she has a medical emergency, but if she is "upside down" on the property then there is no equity and you couldn't get a HELOC.

You might go a little lower on credit score, since poor people get hit harder by things like car repairs and medical bills, but the ones who never paid a bill in their lives are gonna be a disaster no matter who covers their rent.

The short answer is it's a lease agreement and an option to purchase agreement, allowing the tenant to exercise that option to purchase if they decide they want to.