I did not have Flood Insurance, foolishly thinking my hurricane policy would cover this type of hurricane related damage (learned my lesson) I'm looking at expensive repairs and possibly a home that my tenant can no longer stay in (they evacuated for the storm as did I) which would be a loss of rental income for the foreseeable future, on top of uninsured repairs.

The existing mortgage stays in place and the buyer takes over the payments and the deed is transferred to the buyer.The most common stipulation found in a “subject-to” contract is that of the buyer completing a home inspection.However, with home sales becoming more difficult and find the need to sell their house for far less, buyers are harder to find and those that make offers are not able to complete the purchase because they face difficult lending criteria.This is where subject-to an existing mortgage comes in, what this means is that we the buyer of the home takes over the title to the property, but the seller retains the mortgage itself.

stay under the 10 and you should be OK. 

If you're not experienced and extremely comfortable with it, get a realtor.  

I would also advice to stay away from C class areas, I lived in Sacramento for 8 years while i was going to college, have friends lived all over the area, so I know what area to avoid.  

She never felt comfortable putting his name on the deed of the home.  

I feel comfortable with basic work such as paint, floors, kitchen upgrades, and maybe adding a bedroom/bathroom with the help of a contractor.Here a rough example with figures I just made up:Purchase – 120kRehab – 15kARV – 170kForced appreciation on rehab – additional 35k or 233% of rehab costDoes this sound right or way off?

She's paying $740 a month, on month to month with no current contract and would like to stay if possible. 

Which leads me to advice new landlords to self manage so you know the business, you learn how to screen tenants, learn how to screen for financially strong tenants who will stay many years.  

With 40,000 down assuming 35k and 5k closing thats a good amount of money to be hoping for less then 2k a year in passive income (assuming rental market stays the same and does not increase to the 2350/month)this changes on financing and your idea with the property, just my opinionGreg