Then I spoke to someone in the insurance business who recommended I should be north of $120 when rehabbing homes as certain unforeseen costs can arise such as asbestos, foundation issues, and a long eviction process which leads to longer holding costs.

So the big question is, under what circumstances would someone want to offer a tenant a month-to-month lease agreement?

Let's say Party B is sole party on the mortgage at 80% LTV in each circumstance.

What do you think I should do given the circumstances?

Unless there are special circumstances not here disclosed, if it was me I'd start at a closer in community. 

Despite the circumstances this should  good learning experience. 

You'll want to discuss with your CPA who is familiar with all the facts and circumstances. 

Does anyone fear crashing and burning at some point if something unforeseen happened such as 2008? 

Thus, your fact pattern would generally lead to short-term cap gains, subject to ordinary bracketed rates.You should speak with your tax advisor as he/she will know your facts/circumstances and be qualified to really dial in advice.Note this answer would be different if you originally owned the property in question and sold to your friend on an installment sale.

It's unfortunate, but as soon as a tenant thinks that you'll "be cool about it" if something unforeseen happens, things suddenly start to come up more frequently.