Has anyone specifically dealt with this issue in this particular town, and what safeguards if any should be implemented?

When you deal with foreclosures have your own title company and safeguard your investment.

There is no sense in discussing reckless investment into hot cyclical markets without these safeguards...those investors are not on BP trying to learn how to prudently invest.These BP market correction posts have been going on for years.

We feel confident that once we apply our own screening criteria, we could find decent section 8 tenants, however, I am questioning, as a safe guard, if it's legal to give a tenant a notice of terminating a lease if the tenant has caused enough damage or incurred enough fees to deplete their security deposit.For a prior experience example, our last Section 8 tenant (the "final straw" tenant) had a $650 security deposit and at one point, had the front door kicked in, breaking  the door, both locks, and breaking the surrounding plaster (not due to a home invasion).

Market appreciation, i.e. buy and hold real estate is my current strategy with a focus towards market appreciation..My idea is that long term buy and hold would be a "safeguard" against recessions.

The finance company she worked for was somewhat new at it, didn't have the safeguards in place and allowed managers in charge of these REO's to set prices and sell them, apparently believing the dire stories of investors resulting in low offers that were accepted.

I’m Leaning toward the helo because I can get  fixed rate for up to 60% LTV for 20 years and keep the 3% primary loan as a safeguard against falling rents, if that ever occurs. 

Their primary safeguard to protect that goal is forcing their partner (the borrower) to have as much of their own money in the deal as possible, such that if they quit making payments the bank is whole.

Unless you are experienced and have safeguards in place you will need a property manager. 

And you can put safeguards in place to ensure payment or minimize risks.