I am sorry to hear about your situation!
I think if he were a real friend...he would understand if you tell him that it would be just too much work for you all to make it into livable...maybe he coulder lower the payment if he realizes all the damage that needed to be fixed?! He is a friend...and most friends listen!
On the flip side...you are needing a place to live....and if it is one of the only options...my guess, you will have to take it....but, really...how rushed are you to just settle for a place that will end up costing a lot of money in the long run to fix up?