If so, then there may be a way to work something out that makes sense for all parties.

If you're not owner occupying it, be prepared for a 75% LTV loan, so if you're putting down 10% now, be prepared to have the other 15% in order to refi (not factoring in principal paydown or appreciation/depreciation of the property).Separate from the seller finance, make sure the rental numbers make sense.

I don't think a hard money loan is a bad idea..if the deal makes sense.

If she is taking on mostly an advisory role, and having you run it, 50/50 sounds fair, but I don't know her requirements for a deal to make sense for her.

This make sense, right?

I don't get the sense that the previous owner actually knew about this as he was a very "hands off" owner of the property and was informed by the house cleaner about the puddle on the floor.

If you really don't need the information then it makes sense not to dedicate the time to really study it to remember it forever. 

My property's lease is coming up for renewal at the end of June and I wanted to get a sense of how many weeks before the end of lease do you start to advertise the property? 

I know a bridge doesn't make sense in your case b/c of payment status, but is there some flexibility there?  

Does this setup make sense and work?