My sister is selling her house to me; however, we want to do a mortgage transfer since she currently has a 2.5% interest rate, but the bank will only pay what is owed on the current mortgage.

But, most  municipalities will settle these for 5-10% from someone who comes in and fixes the underlying issue.Some research and leg work may lead to this being a non issue (insurance company pays the claim/contractor) or maybe not…but worth putting some work into it.

The larger brokerages are all paying $20-$80m settlements and small brokerages have no protection if this ever comes for them.

The way I saw real estate at the time was, saving money, buying a multi family, live there with tenant who help pay for my house.

As to paying off mortgages,  most rarely pay as agreed over 30 years.

Should I just contact my attorney if she does not pay rent on the 1st?

That would be a little higher than I would care to pay. 

Not only covering the rental income in cases where the dwelling is uninhabitable but more so if the tenant defaults and stops paying rent and has to be evicted.

One San Leandro landlord is owed $132,000 in back rent and in Oakland you can't discriminate against rental applicants with a criminal back ground (except sex offenders) and several stories of non-paying tenants which took thousands in legal fees to evict in Oakland. 

So, you end up paying money to file the lawsuit which gets added to what they owe.