They are older and will need repairs in the future.My plan would be as follows:Purchase for $200,000 with 5% down so I would be into it for $10,000.I am asking that the owner hold financing for 5-7 years at 6.5% while I save the monies, improve the properties.  

I fully agree with you on the land; we're not wanting to go into the suburbs but rather exchange 15 acres of ag land for 2-5 acres of wooded land. (35 acres with the rental home included) All this acreage adds up to a lot of work in fence repairs, keeping ag status current with cattle, cleaning up trees that have been dying in this long drought, picking up trash that blows from the road, weed control, etc.

Finding good contractors has always been difficult, its the hardest part of this business, and with new home builders working again they are sucking up a lot of the quality people and driving up prices.

I’m also concerned with quality of materials and maybe I should accept that things get replaced more often in an apartment and just buy the cheapest of everything I can find?

But if you have a real business setup, and have been operating it for at least a year or two (with two years tax returns), you should be able to go to many lenders and get quality access to financing -- albeit with more paperwork than the other guy with the W2.

Do not let her make the repair; she is likely to make it worse. 

Although I have the money for purchasing and the repairs up front, what kind of money should I keep in reserve for after the deal?  

I will find the property, get a conventional bank loan, find a tenant, do the repairs etc. and manage the property.

It could be A) you are asking them to pay closing costs which could be about $10,000 or moreB) They know of repairs that are needed to get FHA approval that they would have to complete which is why they requested conventional onlyIt could also be both. 

You can buy a home that could need rehab or cosmetic repairs and fix it up yourself.