While I’m working on the improvements, how can I protect our investment from theft of appliances or materials?

A purchase and sale contract usually mentions and act of god paragraph and if something has  (materially changed) with the property the buyer can cancel.

Landlord shall have a lien on any improvements, materials and personal property within the Premises to the extent permitted by law for amounts owed by Tenant following any Default.

Here is some good reading material for you regarding "disqualified parties".https://www.irs.gov/irm/part7/irm_07-027-020.htmlYou will also need to become very familiar with "prohibited transactions" as well:https://www.irs.gov/irm/part4/irm_04-072-011.html

Advised her she would have to pay for the damages..labor and materials.

I would love to learn more about the laws, What kind of materials would be the cheapest on a low budget.

If the deal never materializes you would have wasted your buyers time.Also historically, what has been the best experience for any of you in regards to finding leads/deals?

I own an internet marketing company so if you have that much every month it might be something to work with maybe but prob still not.

Plaster is a typical material used in vintage homes in the area, built before the days of drywall.  

Is he capable and qualified of being a model and looking cute in pictures that go out in your marketing materials and earn money that way?