Also, there may be some tax benefits if they can qualify for federal funding based on low income. 

5% down federal loan How did you add value to the deal?

I have $20k, but don't want to exceed $15k down so that I can have at least $5k in reserve.

This way you can calculate how much you can realistically invest and keep for reserves.

If you are considering long term holding always remember to include your reserves for cap ex, maintenance & vacancy. 

Now, were looking at new regulations since it's been ad-hoc since the federal court case. 

Clearly you have some reservations getting into business with this builder as well if this is something you feel is necessary.

FHA Loan (Best for House Hacking) 🏡✔ 3.5% down option (keeps more cash for reserves)✔ Must live in one unit for at least 1 year✔ Mortgage insurance increases costs✔ Good for maximizing leverage if you want to save cash for future investments3.

I heard she had a federal case and did time.

And always have reserves to handle any unexpected issues.