I actually helped out of area investors with turnkey rentals in my home market of Scranton PA, so I can answer any questions on how to turn keys work for you, as they may  more or less work same way nationwide.

There is always the idea of a "cash for keys" deal where you pay the tenants to move out early.   

Using a good property management company is key I'm assuming, what else should I watch out for?

I wouldn't let it scare you off, but I have watched some very unfortunate situations unfold being a mortgage consultant over the years when it comes to bad foundations and bad home inspectors.  2 opinions is a must, and  make sure the sellers know how much it worries you.The key is you hold all the cards. 

Fill in the foundation below.Check out the Start Here page http://www.biggerpockets.com/starthere Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice.

The 20 year amortization period gives you a lower payment while the five year balloon protects the lender from having their money tied up at a low rate.Finding a new lender is key. 

Nothing wrong with that.This may be a drastic solution, but it might be the way to go.You need two new tenants.Don't renew the lease (no incentive), and cash-for-keys (help them get that car out too).You're planning a full renovation, right?

@Tom HunterI can't help directly but if you put Fort Collins and other key words related to the area you are interested in more people will likely see it.

Fill in the foundation below.Check out the Start Here page http://www.biggerpockets.com/starthere Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice.

If you do not, this sounds like a potentially very rough way to learn about them.To me the key phrase in your post is "they can't get a loan because of their credit score".