The numbers on potential immediate return that I've been given by the other parties involved may be slightly inflated. 

I would stay away because since there was a fire it is going to be deemed an unsafe structure attached to it which means architects, engineers involved on top of the permitting process.

HUD may be involved as well. 

I have about $15k saved and am looking to get involved in real estate.

As stated this would be my first investment property so there are nerves involved and uncertainties so take it easy on me! 

Having both involved gives you the strengths from each and makes up for the weaknesses of each.

Lately, I have been reading the various contracts involved in a transaction.

The Parents are NO involved at all, There is NO Trust , NO will - it will be done directly with Deed on the behalf of the minor GRANDCHILD and  appointed property guardian to manage the property and distribute the rental income to the friend.I am just trying to understand  my options before I talk to a  lawyer and CPA . 

He said he wants to stay and see if he can find roommate or i can find one for him.which I don't want to involve into.( also I doubt if he still has a job) and I personally want him to leave, sometimes he says like I have rent for next two months, sometime he says my dad is helping with rent etc.. i can ask/tell nicely to him, that finding a roommate may not workout , and ask if he can find some other place, and I can provide the lease termination based on the date they decide to leave.also these kind of discussion are better to do in person / on phone or in writing (email) ?

So to answer your question I have not came across a lender that would look the other way when flood risk is involved.