This definitely gives me more confidence to pursue the safer option right now--at least to start out and get my feet wet first before taking something bigger with more risks. 

This risk has a value.

In most states you do not have clear title unless a Quiet Title action is done, a certain number of years since the sale has passed, the past owner may have redemption rights, etc..Also check for zoning and use restrictions.....many vacant parcels go to tax sale because they can’t be built on and are useless..This is not something you want to buy if you don’t know exactly what risks you are assuming.  

I also trade stocks (day trade and swing small caps) so my risk tolerance is quite high.

I am familiar with smart investment stratgies and risk tolerence.

It was sold for a large down payment, and I carried the note for the balance.

Depends on their knowledge and risk tolerance.

So, basically using insurance and the IRS to help subsidize my risk :)2.

It truly depends on how much you have and your risk profile 

You must always keep atleast a line of credit open so you can mitigate risk for repairs and hiccups