If the property is in a High-Risk Flood zone then the HOA would buy flood insurance for the building(s) and the cost will come out of your fees.

Unfortunately a lot of times with old stuff they don't carry the parts for it anymore.

@Craig Sweeney  That's a very open-ended question depending on your circumstances, other assets, relationship with your sister-in-law, budget, type of property, type of tenants, risk tolerance, etc. 

Staging does not have to be high-risk (expensive).  

I use different LLC's for different asset classes (ie mobile homes, SFH, MFH) based upon risk, and ease of taxes

As far as I know an HOA board can hold as many meetings as they want but they risk the rest of the association turning on them.

Also, As I have said before in these forums, it really comes down to your risk tolerance and what you are trying to accomplish with your REI.  

In order to mitigate risk, I asked that they provide 3 months of security deposit funds under the pretence that if they pay on time for 12 months I would refund all but 1 month or just apply the other 2 to their rent due. 

How do I balance these two scenarios so I'm getting what I'm worth, but also creating value for my investor taking a risk on a first-time flipper?

There is a price that the investor is willing to pay for it depending on their risk profile.