They were very happy with this arrangement. 

I advise people starting out to pick a market where you can get there easily - you need to visit yourself to get familiar with the areas, the kinds of deals available, and arrange trips where you can attend REIA meetings where you can meet people on the ground.

If you want to buy outright or on terms, that can be arranged. 

The tenant got behind on the water bill and finally made arrangements/agreement with Water company to pay a specific amount monthly to bring the account up to date.  

Have them arrange showings on that (likely) weekend at your target properties and throw in another 5-7 that look like potentials.

Why don't you just use your own funds for the down payment, and work out an arrangement with your friend to cover the rehab expenses.

Are there any verbal agreements or arrangements between the current Landlord and Tenant?

As a result the terms/carveouts/covenants were already pre arranged. 

If you make that 2nd arrangement, you must fulfill your end of the agreement each time to build a trust level for future work with the contractor.

Are there any verbal agreements or arrangements between the current Landlord and Tenant?