What is your motivation?
Providing accommodation to your friend?
Securing yourself financially, long term?
I would say "do it", but am hesitant as your fist tenant is a friend on benefits. Hardly business savvy to become financially dependent on a friend whose own finances are rocky?
You need to check the terms of your mortgage carefully, some wont allow housing benefit.
The only real advice I can give is to rent unfurnished. Less for you to repair and be responsible for. If you supply a chest of drawer or a kettle, and it becomes faulty/broken, the responsibility is YOURS, and you need to either fix or buy a replacement. The second is, to arrange that her housing benefit is paid direct to YOU, not to her first.
We let our London home for 4 years while overseas, and in this time had to replace a shelf on the fridge for £40, this came to £84 including labour, have a handyman out to repair a daybed, he charged £44 per hour plus vat, plus part. Spend 6k on rewiring the property, not receive rent for the days the property was uninhabited due to rewiring, and endless problems I cant remember now.
I did have a single mum on benefits as a tenant, she had glowing references (probably because her landlord wanted to get shot of her), she filled our garden with nappies that she threw out of the bathroom window, let her kids scribble on the walls (3 coats of paint were needed on all the walls, after scrubbing with sugarsoap). She never cleaned. The floor next to the toilet was orange of dried up piss.
The most important bit though, she failed to notify us when there was a leek under the kitchen floor, and left it until the ceramic floor tiles were bulging and cracking before she said something, by then plaster was coming off the walls, and the house was a damp pit. The house had to dry out with industrial fans and dehumidifiers for three months before work could commence. 6 month void period, and expensive repairs to the value of £20k on top of what insurance paid for make good works to kitchen and hallway. It was so water logged outside the ground had to be dug up and irrigated!
When she left, this coincided with the dehumidifiers being brought in, she was 2 months in arrears with rent, and 3 months in arrears on gas and electricity. It did not matter much that we took meter readings when she left to close her accounts, as Landlord, I was responsible. We could not have gas and electricity cut off when we needed both to dry out the property. It truly was a nightmare.
Our next tenants were lovely though. Students at a nearby uni. Their parents acted as guarantors. Never late with rent, tidy, and took great care of the property - it was totally refurbished when they moved in. We did not have to do much to it when they left.
I know she is your friend, but you cant let her tug at your heartstrings!
Why does she need somewhere new to live?