Should I first secure a pre approval for what I am qualified for or should I just continue looking at properties.

If the investor needs more security before investing, attempt to find a tenant who can agree to lease for higher end amount based on comps once the repairs are done, then sell 1/2 to investor now that you have Letter of Intent from tenant. 

How will security deposit be handled?

There are now private market flood alternatives (not part of NFIP) that may or may not be better or less expensive. 

They were sure that their house would close on a certain date post lease-signing, and upon my urging (twice) they confirmed with their real estate agent that their buyer's financing was secure.

Everyone is saying buy with no money down and you can use a private lender or Hard Money Loan.

She said most are private households that host tourists an average of five nights a month for average annual rental income of $5,500 a year.Celia Webb, who became an Airbnb host in December, said demand has been “nonstop” since she listed the fourplex she bought last summer near North Stone Avenue and West Glenn Street.

As @Jim Pellerin had in his list, private lending and notes.

Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5.

I hope that the old owner transferrred the security deposit to you.