If you have to restore with only certain materials or methods, that may increase the amount of coverage you will need.2.

So I like your plan as it is the primary method that I use.  

Is it possible to get short term private money/hard money financing to pay the owner of the house in cash and then secure the FHA loan within a month to pay off the hard money/private lender?

The easiest and most secure way to do this for you would be for you to buy the house subject to the existing loans.

@Amy Hu 1st step secure property.

If your goal is security and a retirement asset, then I’d consider leaving it as it is (if you can weather the coming Capex and any breaks in cash flow). 

Would like to rehab using the brrrr method on small family units to grow some equity and capital, then air bnb smaller units in the inner city area.

You have the amazing advantage of knowing which streets in your neighborhood are able to secure long term tenants.

I guess if damage is done I have security deposit and legal recourse as well.

It depends on if IRS considers you an investor or trader. they look at different factors, I pulled court cases where they looked at these:(1) the taxpayer's investment intent; (2) the nature of the income to be derived from the activity; and (3) the frequency, extent, and regularity of the taxpayer's securities transactions (Kay; Mayer; and Moller)  A taxpayer is a securities trader only when both of the following are true: (1) the taxpayer's trading activity is substantial; and (2) the taxpayer seeks to profit from short-term swings in the daily market movement, rather than to profit from the long-term holding of investments.