The tenants will pay most or all of the building's expenses.

Congrats on your purchase.If you bought it at a good price, hard money lenders will often lend you most or all of the rehab plus purchase.  

Its about $15 a month and perhaps if it clogs a year from now some or all of it would be covered.

I could save a healthy amount of money by avoiding some or all of the hard money costs.  

Local laws might impact this, but I often take holding deposits as some percentage or all of the security deposit to gauge seriousness and means to perform.

Options or all at the same time?

You can buy a HUD property and flip it as long as the end buyer does not get an FHA loan.It has to be a conventional loan,or all cash deal.You can also flip a HUD home in Foreclosure before the bank takes it back,but again the end buyer cannot use an FHA loan to buy it.On a HUD property selling at 50000.00 your deposit has to be $500.00,on a property over 50000,00 you need to put down $1000.00.And if cannot close in the 45 day period,you loose you down payment.

Inadequate (read-zero) capitol reserves were my downfall early on in my investing career deals. 

However, Dodd Frank issues aside, the lack of seasoning, inadequate buyer’s equity, short term balloon and the property requiring expensive repairs would cause any experienced note buyer to either pass until you have at least a year of seasoning to see if the picture improves or possibly offer something that keeps their investment below 30% RMV of the house and committed to collecting only a few years of payments.

2) if so that an additional monkey wrench which will definitely influence the value of the note 3) What's the interest rate...higher is better providing it does not exceed the usury rate for Colorado 4) How long is the maturity....shorter is generally preferable within limits, and results in a higher value 5)  Are you wanting to sell some of the note or all of the note?