It would be higher interest but that would likely not be that long from the sounds of your situation.

In general, What is the reason a property owner would allow 1 property to go short sale and why would a lender do it in this situation? 

For my personal situation and goals this deal makes plenty of sense, but it’s not for everyone.

I would reverse engineer your situation.  

CAPEX should cover some of it if you budget well. but like others have mentioned if financed, You WILL have to get insurance in all situations

The prior response should give you a thorough view of the options that are available but knowing which one to use depends on your particular situation and how creative you can get.The reason for this is because everyone is in a different situation or tax bracket.

If so, how could one benefit from these kind of situations. 

FHA is attractive to her due to the down payment size.So here is the situation;Kat has known Marg a while, and is getting a good deal on the house. and by FHA request, she has been living in the house for 6 months before they will consider the loan.

This is a situation where working with an experienced investor friendly agent can help.

Here are my thoughts on you situation.