I would say test it by telling people in the listing what is the size and the value of the house like a 700sqft 1 million dollar beach house. 

I’m preparing for my retirement by getting into real estate 

Did you only remove the drywall and flooring and not do any testing? 

I'd share that if I did, I'd be prepared to pay them to vacate.

The property passed final testing by the county health department.Is this anything I should be concerned about?

You just buy as many as you can and then figure it out, there is no way to prepare, you just deal with it.

Without reserves, they might be unable to evict tenants or prepare the units once they are vacant.

it sounds like you're really eager to deploy a bunch of capital into supposedly cheaper markets, but you're not going to cash flow $500 on a random single family anywhere unless you are self-managing and super hands-on and prepared to deal with rough turnovers.  

I was drawn to this investment mainly to test out the new padsplit model.

However if you plan on buying 3-4units, there is a trigger rule for FHA, it is called the self sufficiency test.