And reassure them by doing things like adding them on the insurance policy (and you send them proof before funds are sent over). 

I have had great success with French Drains (google) I had a property in Ca and sometimes it rains furiously there and water would literally pour into the basement like someone turned a tap.

You also may get tripped up by other things like proper support in the structure, ratio of windows to the buildings envelope (I'm not as familiar about this but have heard stories), etc.For some properties this added cost and hassle may be worth the investment to change the use from residential to hotel.

He wants to add a penalty in the contract that is higher then Minnesota c4d “RULES”By adding this the contract would be void.

You have almost 2 years to figure all that out, while adding value to something that is yours.

Your PM may handle doing the repairs and placing tenants, but that depends on your property management agreement and you pay for the costs associated with that.I did a Google search of the property which does look to be in a class d neighborhood.

Definitely a 'D' area.

I googled it and got a basis of what it means but want to get a more in depth answer and a step by step of how that process works.

Yet we mostly hear on BP from those who are buying cheap and adding value.

Google CBRE 2018 1H Cap Rates.