My strategy plan was to house hack a multi-family unit on a FHA insured loan, though I may have to rethink my starting approach.  

I'd recommend reading through your documents and perhaps discussing it with either your lender or attorney.

As to your question: I believe that for any loan over 78% loan to value (an FHA with 3.5% down would have a loan to value of 96.5%) you have to pay private mortgage insurance (PMI) to protect the lenders in case you default on the loan.

No negotiations can occur until after it is listed,the owner supplies all the required short sale documents, and a purchase agreement with a buyer, that the bank deems legit (POF, etc.) is submitted.  

I would ask the seller to present you their previous leases and any kind of documentation they can provide you. 

We've been chatting with insurance brokers and a couple things have come up that I'm not sure about and don't know if they brokers really know either.The property will be owned in the LLC's name.

I was hoping I'd find support for whether or not it would be a good idea to get hard money for a 25% down payment, traditional financing for the remaining 75%, with all profits (rent less both loan payments-HML and traditional financing, prop tax, insurance, and 10% maintenance fund) going to the hard money lender under the loan is paid off. 

If you are 5th in line, you might want to also start looking for some other properties in the meantime.If you  have only a tax certificate, it is sometimes hard to get property insurance.

Master insurance policy issues can be daunting as well.Seems to me that it would be easier to construct a duplex.  

Make sure though that they are licensed and insured to do snow plowing and not just a "chuck in the truck" because there are a lot of those offering plowing services.