No representations can be made on how any court in any state or federal, will interpret the regulations or apply them, and that said interpretation or application will be different from this analysis of the law.Therefore, there is no guarantee that relying on this analysis will prevent governmental or civil actions against the lender/seller.

I would probably do the chimney liner and cap to prevent water from getting into places it shouldn't which could lead to more damage. 

It prevents problems down the road and helps you avoid fair housing issues.

I simply take over the deed/note, start making payments on behalf of the seller and have conditions/exit strategies in place just in case the due on sales clause (DOS) clause is exercised to prevent the original seller from facing a financial crisis if it defaults.

If your nerves are preventing you from doing the flip, perhaps you should consider a mentor or partner for this deal? 

It prevents an expensive mistake!

Clear expectations is the way to go, and prevents ton of future issues. 

We're careful not to work on the file at the same time but on rare the occasion we actually have, QB puts a lock of some sort on the file preventing you from getting in or saving your work.

My question is would it be wise to use vinyl planks(throughout the house) as flooring and carpet tiles(that hide/prevent scratches in vinyl plank) where tenant will be placing furniture or is there better way?

The clause does not attempt to prevent the tenant from having guests.