Are there any specific "red flags" I should be looking out for?

Look out for all the same red flags as you would on a "private mortgage lender," things like up-front non-refundable "application fees" and the like.

It was running in the red.

I think it would be a big uphill battle to convince a judge of that, but it is not out of the realm of possibility.Looking up the legal requirements for Unjust Enrichment:1) Must have provided something of value while expecting compensation in return. 2) Other party must have acknowledged, accepted, and benefited from whatever was provided. 3) Must show that it would be inequitable or unconscionable for the other party to enjoy the benefit of your actions without paying for it.Gut feeling is that she will fail on the two bolded parts: She never expected to be compensated; And she took a garage door that she had trouble opening/closing and made it easier for herself.

If you follow those recommendations and execute your plan for the property, your concerns over "red tape" for a rehab will be a small obstacle when you realize you have acquired an income producing asset that you can own indefinitely.  

Their a much cheaper option for my area( Southern California), are there any red flags I should look out for when house hacking mobile homes?

Huge red flag. 

Any other red flags I might be missing?

The one red flag I noticed is your ARV.

For example, here in my city of Eugene, it is a red hot sellers' market.