Instead, have the PM include a requirement to the Rental Agreement that Tenant must maintain water and electric to the system 24/7; must report damaged heads or leaks immediately; and is responsible to restore the yard to current condition upon move out.

He maintains the property @ his expense & pays $1800/mo plus taxes, ins, water, trash, etc etc.

However, the warranty is held by a termite and pest control company, who require an annual inspection costing $175 in order to maintain the warranty.

These were decent, well maintained properties that you would be comfortable visiting at night.In my experience, the $10k properties that you mentioned are not going to be able to pass an inspection making them eligible for Section 8 without a substantial rehab.

These projects usually pencil with 7-20%+ rental increases after the asset has been improved by investing significant capital ($5k-$15k / unit) to not only make the units look better but to fix differed maintenance and to properly maintain the asset.

If your lease contract says to "maintain yard," I can promise you that the tenants' perception of what that is will be different from yours. 

The FHA loan does have certain requirements, I'm guessing PCs orders coming in would show that you originally had good faith in maintaining your residency.

He was low on funds and could not maintain the property or pay the $1600 a year in property taxes.

And your entire investment will be managed and reviewed and maintained by someone you probably don't know very well.- Why do you think there are no deals around your area? 

How will you be paid: mail, direct-deposit, etc.What is the minimum reserve you must maintain?