For instance, if he paid $40,000 to buy a house and sold it for $80,000 with $10,000 down, he could keep $10,000 in reserve  and tap into it to hire attorney, file eviction case , remove defaulting buyer/tenant and continue paying off investor loan (if he used PML to buy that house) while looking for the next buyer to sell it.

Prioritize quality locations.Keep healthy amount of reserves per property, hire a PM, and hire a tax friendly CPA(not planning just prep). 

I'll also want to have more reserves available the more properties I have.Am I oversimplifying or missing something? 

When ready, start with a small property, near home, with enough capital in reserve to handle adversity.  

They offer a $10K repair fund to fix damages in addition to SD plus warranty for appliance repair etc.I have no say in whom they choose to move in, whether there are animals, limit on # of occupants etc. they reserve right to inspect property so i have no idea if they can tell me to remodel, paint etc.does this make sense i have a vacancy coming up in October (bad rental timing).

If leveraging equity feels too risky, you might consider using a portion of the equity to fund your next property while keeping reserves intact.

All liens will not be confirmed prior to the sale.4.

You must first confirm that the cause of the leak was because of the tenant.

For reserves, some lenders want 6+ months. 

Something to look into in your case.I would recommend having the seller send message to all people already booked with your new listing & have him contact AirBNB or VRBO to cancel those reservations due to a sale.