Under any scenario, any state, someone who sits on their rights and lets someone get into the weeds to the benefit of the person who sat on their rights, will NOT have those "rights" enforced by the courts.  

I wanted to help them out and minimize their loss and saw an opportunity to get a property slightly below market because of my commission savings, immediate mortgage and maintenance relief, in addition to keeping a lower short term interest rate How did you find this deal and how did you negotiate it?

Instead of losing 55k they will probably only end up losing $25,000 - $30,000Long term its not a great cash flow property but with some renovations and addition of a parking slab I think long term appreciation is the big goal here.

Your relo benefits will likely govern this decision more than other factors.

Maintenance/cap ex, insurance, if a rental PM, bookkeeping, misc.The fact you have a loan means 1) leverage 2) equity pay down.In addition, there are tax benefits.So I will do some rough underwriting as an OO non-rental at 95% LTV (because FHA has some undesired consequences that make the 1.5% difference in LTV worth avoiding the FHA).equity paydown: 20% (using OP interest rate at 95% LTV and not counting closing costs). 

Use extended closing periods or additional earnest to buy more time for your old property to sell if you need.The last option is what's called a reverse exchange.

Even if the rental has a decent cash flow with additional flood insurance, we're still not sure we want to take on that risk as we are out-of-state investors (planning to move back to KY in the future, but not now) and we don't like that it will potentially bring down the perceived value when we try to sell it in the future.The seller has never lived there and has not provided any information on if it has flooded before or not. 

You can prevent this by requiring them to add you as "additional interest" on their policy.

I have just under five rental properties and I understand the legal benefits of creating an LLC (married to a lawyer).

Find someone where there is a personal connection and at some point your relationship now or later can benefit the mentor.