There is a clause in the HOA insurance that will cover pipe repair and replacement if the building is declared condemned by the city due to water-related issues.

Are the above numbers with permits and insurance? 

It depends on how you split the revenues.If the house is free and clear, you two should decide if you get to bank all the money after paying expenses (taxes and insurance) or if you have to split it somehow in favor of your rehab work or just 50/50 the whole time.Also, if your friend decides to sell it year 2 or 3, and you still haven't recouped your rehab funds, do you spit the proceeds of the sale?

You'll want to look at all the fees, on fha there is mortgage insurance.

Biggest advantage is that with conventional you can drop the mortgage insurance monthly payment eventually, whereas with an FHA loan you can never get rid of it.Good luck!

My first investment cost me $6,500 to buy and then $10,000 in repairs in the first three months (I got half of it back from insurance but it took a couple months).

In the last 2.5 months, we have been working tirelessly to make these reach our very high standards. 

No you do whats called a credit bid.. you already have your money in the deal and your expenses  and tax's if you paid those.. so what ever your owed plus late fee's and interest and foreclosure costs any money paid to senior lender and insurance any property tax etc.. all that is added into your credit bid that your entitled to.. your not entitled to more though. 

I’m thinking of selling life insurance part time to save money or should I just put all my focus on real estate?

Low taxes and insurance.