After seven days, she finally paid me the rest of the moving in fee, which is first month, and last month + security deposit.

As Is" simply means the seller is not agreeing, in advance, to performing any repairs typically that may be required to be in a financable condition. 

Fannie Mae, or FHA who is in my opinion the toughest lender when it comes to condition, only require a property is safe, and secure.

Some people get impatient and buy crap properties.It is better to not buy anything than buy a property marginally performing with bad debt on it.

Reading through the comments here, the two things you have to consider is the de facto PM function this guy performs, and the condition of the apartment.

In my state we also need to honor the lease put in place, definitely see if you can  secure a copy of the current leases and check what they say and what the laws are in your state.

This would be an off market transaction, no local agents involved, but still full due diligence for inspections and appraisal. 10% down, 700 +/- credit scores, and good DTI.What's the feasibility of me loaning her the balance of the loan after downpayment, creating a note, and then once it has a three or six month history of performance selling that note?

I always recommend new hosts to establish in a city that already has regulation on them, yes you pay taxes on it, but it makes your investment more secure. 

If the seller is not justified in canceling the contract, then they would be in breach of said contract and could be sued for specific performance. 

I have never collected cash, I even require security deposits to be submitted via the bank so there is a paper trail of everything (for them and me).