Personally, I advocate for a long-term investment strategy and would recommend investing the funds, provided you are comfortable with the expected return on investment over time.

Even if you personally have just a modicum of design aesthetic sensibility, after reviewing 20 or 30 properties, you will quickly be able to get a sense of the winners.My 2 cents,Mike

I have not done it personally but have some insight, maybe my reply may boost your post to someone with more experience in it. 

Personally, I would prefer to use the HELOC approach.

This will allow you to remove the person and do the financing on your own.Home Equity Loan/Line of Credit: Since you're looking to access equity, a home equity loan or line of credit (HELOC) can be a good option.

If I understand correctly; the seller would receive 80% ($40,000) directly from the mortgagee at closing and would enter into a personal agreement with me for the 20% down payment ($10,000) in which he would be reimbursed separately from my mortgage payments at a separately agreed upon rate and term?

Are you able to go there in person to build your network? 

So they price those homes at what a willing homeowner will pay for their personal residence.

With that being said, I personally know several people who've had tenants that stop paying their rent and try to hang around for as long as possible. 

Personally, I think this company is probaby about to go out of business - they have lots of inventory, and it's not exactly prudent to be investing in FL in the coastal areas now anyway.