Again, it's all speculative until you actually have to file a claim and an investigation is undergone and completed. 

If you found a situation like you described in that area, it would total be worth further investigation.

It's refreshing to hear also that you've managed to be successful with properties that don't necessarily fall into the 1 and 2% "rule" categories... while I've seen many properties in my area that do meet those guidelines, I've also investigated others that definitely don't!

Besides negotiating with the seller's agent, we are also investigating if other funding vehicles are available that we could use to pay off the hard money loan and have a more reasonable interest rate to help lessen the financial burden of them being in the property should an eviction be necessary.  

I am aware that it is my responsibility to do my due diligence (full investigation) of the property, so I want to make sure I am covering all my basis to ensure that I am making a good investment.

Upon further investigation I have found articles on owner financing and contract to deed.

If you can't find what you need, then go ahead and investigate a course.Please don't take this the wrong way.

Hire a Private Investigator!  

I have since learned that, while the area my property is in is really OK, there are other areas in town that are a lot dodgier than my google investigations and initial drive  around town revealed. 3) bad property management.

FHA will most likely have some restrictions however they do offer the 203K programs (I think they're still offered) which are intended to be used for property renovation.If there's no time pressure, continue doing all the investigation you can and remember that it may be necessary to do several loans in succession in order to end up with a fully renovated property and long term bank financing.