I understand there are outlier experiences, and while on the surface yours appears to be one of them, it may not be as uncommon as you think.  

Personally, I would take that money and use it on new hard surface flooring in the dining room instead of carpet.

Put that over surface, skim coat with a smooth mixed dust control pre-mix (The Home Depot and most big box stores carry it). 

Most seem to have Moen water valves & solid-surface showers of some sort.

There was a time where that was fashionable but something has changed because no one is doing it these days in Colorado.

I see a major problem with back side profits coming to you.You could obviously do it as a hard money loan.You might also be able to just have your IRA own some or all of an LLC that took title of it.You could have your IRA take title to it.But what I would certainly not suggest is a hard money loan, and you get some of the profits in some other fashion.

Sounds on the surface this is a great way to place your properties. 

When purchasing a property in this fashion, there a few things to take into consideration insurance wise.

It's also not harsh on most surfaces.

My experience is if things are this messed up (tenants paying each others utilities without knowing it) you are just scratching the surface.