Can she not rent out the home and "pay" your friend a large "manager fee but is saving some or all of it so Medicaid will not see and he quietly pays her back all or some of those "management fees" after Medicaide people check her capability to get help from them?

One, or all of the tenants? 

A 3-day cancellation notice, informing you of your right to cancel your contract if you signed the agreement in your home, or at a place other than at the contractor's office or business;All warranties on the owner's rights; A statement warning, in ten point bold type or larger, directly above the space provided for the signature, the following: DO NOT SIGN THIS CONTRACT IF THERE ARE ANY BLANK SPACES.Whether any lien or security interest is on the residence as a consequence of the contract.An enumeration of such other matters upon which the owner and contractor may lawfully agree.Any other provisions otherwise required by the applicable laws of the Commonwealth.A clause informing the owner about: any and all necessary construction-related permitsthat the contractor must obtain such permits.that owners who secure their own building permits or deal with unregistered contractors will not be eligible to access the Guaranty Fund.Acceleration of payment: No contract can contain an acceleration clause that would require any part or all of the balance not yet due to be declared due and payable because the contractor deems himself to be insecure.

Yes, there are good ones... but there are far more bad ones who either suck at managing time, customer service, funds, or all of this and then some.

or    'All I can get is crappy short-term adjustable rate commercial financing on my house because I own the house inside an LLC.'

Should I keep them separate or all under 1 mortgage?

When a landlord is having issues with tenants not paying on time it is always the landlords fault due to inadequate tenant training. 

That being said, all vacant land is not equal and some or all of the problems above can hinder your "flip". 

As subject to, lease/option, wrap or all inclusive trust deed deals.  

So I’m assuming that’s in regards to the FHA loans or all refinances?