Also, if you have to do major rehab to a place where the renovations exceed 50% of the current market value, a lot of cities will require to bring up the property to current code, which can add to your expenses to repair things you otherwise would not, such as making the place comply with energy code requirements and next thing you know you gotta replace the windows and insulation. 

@Harman N. you can use sound proof insulation and quiet rock drywall.

Someone isn't always at fault in every situation and being that the home is located in the South, I highly doubt your pipes are insulated (which would definitely help). 

Whereas Steves scenario is insulated from market gyrations even if his note defaulted and the market when down 25% he is still good its all equity. so do keep that in mind . 

Do the same with the front door, and remove the storm door if it's not really necessary for insulation/weatherproofing.

I like your point on adding insulation in the 3rd floor as well. 

You may need drywall professionals if the damage is severe, I'm not sure what a water remediation company would do aside from replacing insulation and drywall.

The plan was to remove any Insulation if any was present, spray and apply vapor barrier but I did not go into the crawl to see extend as it was difficult to get in.

While not ideal, I’ll agree that it’s very durable and yet, oddly fragile—if you attempt to drill into it, it will shatter, but it’s a great insulator and more fire resistant than other materials.  

As a first level of protection you would need insurances.As a second level, you would want to insulate your dangerous asset (liability prone) from your non dangerous asset (shares, notes, bank accounts).As a third level, you could split all your dangerous assets in separate entities and/or strip the equity out of them.As a fourth level, you would dissociate operational entities from asset holding entities.If you want even higher level of asset protection, you could then look for foreign asset protection trust or entities.