The carped is being replaced first of all because they cut a 5 foot slit in it and stuck a fan under it to dry when this place got flooded twice because of their drainage system outside for rain water..

People take the time to get educated on how to run the numbers and they genuinely know how to calculate every number associated with buying a property.Then when the time comes to pull the trigger on an offer one of two things happensThey don't offer because they feel there offer is to lowThey don't trust in general that their numbers are accurate, they run numbers for another 3-4 days, overthink it, and the good deal gets scooped up.My point is, if you take ample time to run the numbers and get educated on the entire process you have to trust yourself when it comes time to take action. 

If you can buy the home and repair it, all for 10-20% (or more) under its value, pull the trigger.

Pulled the trigger and purchased my first house to fix up and sell.  

I know marketing takes money but I am hesitant on pulling the trigger with bandit signs since I do not have confirmation of their success rate in my area. 

Does she need to take this up with her renter's insurance provider or am I indeed responsible for using the electric to dry the water?

FHA has rules.I would read the due on sale provision.Due on sale clauses can be triggered (not will be triggered) by lenders.See https://www.law.cornell.edu/uscode/text/12/1701j-3Consider a "Lease plus a ROFR" with your residence.See http://bundlr.com/b/rofr-right-of-first-refusal

However, in the case where the first mortgage holder triggers the foreclosure process, Does the second mortgage holder step up and make the payments on the first mortgage?

After reading and listening to numerous posts I've finally decided to pull a trigger on direct mail.

Since you bought the place already I don't think you can just turn it over to an LLC without possibly triggering a due on sale clause where they cancel the original loan.