So don't be shocked if a.) that was their intent when they bought the place to being with or b.) they just don't want to sell so "capital gains" is an easy way to avoid telling a nice guy "go kick rocks".  

Your CPA and attorney should be both on the same page3. make your first investment simple and easy and dont complicate it.I dont think you are quite ready to do anything until you get some one on one advice from some local experts.

Is it easy to find renters there?

Did you find evidence of mold when you tore the house apart?

Not buying is really a pretty easy way to get a nice return without the tenants, toilets or trash.

If they have not met all your criteria (perhaps income) you can consider higher security deposit, or other evidence of ability to pay, to offset that.  

I just met with her, and she was very easy to talk to.

Real estate investing sounds easy and straightforward, but it really can be nerve racking if you aren't used to all the things that can go wrong.

I have a good tenant with no issues, and do not pay a PM, so it is very easy that way.  

In addition, if they find evidence of previous coverage, they will use that value to issue insurance.