So of all resort places on the earth, the Gatlinburg area had a far bigger boom than anywhere else, at least that I am aware of.  

They may not be aware of either of these things. 

It's important to be aware of all the potential legal issues that could arise from a strategy like this.

so if you are looking for a fixer just be aware of the delays and issues with contractors and also be very aware where you are buying. 

Is this possible and are there any rules we need to be aware of?

In most situation you can only have 1 FHA loan, so if you can get to 5% down, you can save your FHA loan for future use, or you just need to be aware that you will need to put 5% down on your next primary.

Long story short just make sure you are aware of zoning in Nash!

Are you aware that if the property had a mortgage of say $50,000 and it sold for $150,000 at foreclosure that the estate (or even the former owner if still living) would receive the difference of the $100,000 from the sale?   

Also, is anyone aware of how long a property has to be a STR to take advantage of the tax benefits before converting it to a long term rental? 

I'm not an expert on FHA loans but I'm not aware of any laws related to that agency being changed.