"My" tenants are not having a hard time at all.We are going through some issues here in NJ with legislation, the majority of it brought about by absentee slumloards.

What you are proposing is to sell a turn key rental as a wrap.

If the signed award letter not received by the deadline, the award offer will be rescinded and your original proposal will be sent back to you.If the City receives multiple offers for the same property, the City may request additional information from all buyers.A deposit of ten (10%) percent of the purchase price (per property) is due within seven (7) business days upon receipt and acceptance of the award letter.The deposit is applied to the purchase price at the time of settlement.The deposit is NOT refundable if the buyer fails to reach settlement."

Your proposal to lease to own for 12 months prior to sale will not convert the property to investment use. 

How would I propose a deal with him to make it fair for both of us?

Marcus, you are incorrect about the tax rate unless you are a C corporation.Also, the proposed change for depreciation of buildings is 25 years.

The rest is brick and mortar existing that is expanding the online presence to compliment their physical stores.What will stifle some online sales growth is laws being proposed nationally  to tax online retailers.

Are you planning to make the building energy efficient in your restoration work ... what other updates will be required by regulation / legislation?

I tend to agree with the age old expression "don't put all your eggs in one basket". this new tax bill is a prime example of why. they are proposing numerous changes that can and will impact returns for RE investors who invest in certain ways. it would suck if all your eggs were in buy and hold rentals and they decided to change the way your rental income was taxed. hence why you should diversify.

@Viktor Bokun You'll want to check the auction Terms and Conditions regarding the type of deed the seller will execute plus the proposed Sales Contract regarding title defects and how they are dealt with.Sometimes this particular auction company will only convey via special warranty deed if you use their title company!