It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.Make sure your property manager is a licensed real estate brokerage.Understand you can not eliminate all risk, only mitigate it.

Ways to mitigate the risk is to continue strong communication with contractors with weekly status updates.

I definitely want to mitigate the risk of any investment I partake in. 

If there is a superior mtg, I would start with their Loss Mitigation dept., assuming the mtg is in default.

(The potential UDFI tax can be mitigated with all the traditional real estate tax write-offs; mortgage interest, depreciation, etc.) 

Does anyone have strategies to mitigate this?

But the good news is you can “ know” and mitigate loss simply by being educated and understanding the The business .

I realize there are many people who do it successfully out of state and remotely HOWEVER a big part of this game is mitigating risk and I feel there's no easier way than if the property is a short 15 minute drive

Hopefully this would improve my cash flow opportunity along with raise rents, appreciation of the property and attempting to mitigate cost (although I bet a lot of people with experience might laugh at me there).

If your wife is willing to be on board with it, I think it's a no-brainer and mitigates a lot of the risk on your first few sets of deals.