I suggest you listen to the BP podcast great way to pickup tips you can apply in your journey.

You can tell them you are updating the unit, and they can apply again after the update.  

Does anyone have experience with this type of deal funding and know if the same rules apply as with larger commercial deals?

My screening criteria still applies (with income requirement reduced) though.  

As I'm writing this, I'm thinking about the deals I'm working on now, and I'm using at least 10 different ways, or combination of ways, to accomplish this.The first part of your answer, and the most important part of it, is you have to learn how money works, before you can understand how to apply that knowledge into "no money down" deals.

There are many rules that apply to these, and it may not qualify with such a short holding period. however since she bought it with the clear intent of renting it may qualify. 

Like above, what government authorities do I need to work with, where would I go to apply for permits, etc. 

It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing.

Get all the properties appraised by a pro...so there is no argument as to their value...when the time comes to apply it.  

Try federal law, mortgage brokering, there is no exception for individual to individual, that does not apply at all in making loans to just any individual.