The use of leverage alleviates more risk as less of your own personal cash would be used and it creates a greater cash on cash return.

If it was a retail plaza anchored by a grocery chain and drug store then I would pay more than one that is just a few shops or anchored by another 10,000sf tenant which those spaces are challenging to lease in many instances.

Would a Lamborghini salesman waste his time taking a guy for a test drive if the guy looks like a homeless person on drugs? 

Call the cops saying they are running a drug operation and they get arrested.

The other hole (though alluded to) is that high cost, high appreciation market homes are almost B class or higher by definition because the incomes required to support the rental base eliminates C and below tenants, ie Section 8, other housing voucher tenants, illegal immigrants, criminal background, drug issues, etc.

A friend of mine is a detective on the police force, and he cases out drug, prostitution, human trafficking, and organized crime.

If its not problemmatic, then I would have ZERO issues with it and let the person who is a good tenant stay and not have to upend their life to move out especially with declining health.Now if the kids are drug dealers and have other people coming and going, compeltely different but if its just them - I would have zero issues with it.

This will help alleviate the DTI issue I was facing on the personal side.

In her personal life, she is involved with someone who deals drugs, as they do drugs and are involved in illegal activities.

I've had similar issues here in Chicago with Squatters and drug dealers.To do a 203k, you need to live in the property for at least a year so technically, that wouldn't be an option.