What sort of tips do people have for a younger prospect to get involved in a more expensive area when I don't have as high a level of cash? 

Sometimes, things don't (or do) make sense at the asset level, but there are strategies above when it comes to overall portfolio and lines of business (e.g. right-sizing business, opex reduction, relocation of assets to e-biz). 

I feel that the flood insurance cost of $120/mo doesn't seem prohibitive to me but I am out of state and was curious if on a local level this has any stigma or large bearing in a buyer's decision (other than the obvious cost consideration)? 

I no little about the place, but based upon the little I do know the following might make it viable:1) WDC in general seems to grow whatever else doesn't no matter what and the entire area benefits2) It's also the number one tele-commuting city in the country so daily commutes may not be a huge problem for many target tenants.3) Lovettsville itself has high personal income levels, quite low unemployment levels, many young professionals, excellent schools and was listed as one of Virginia's best cities to live.

There are a number of other threads discussing the level of risk involved when transferring ownership of property financed under a conventional loan from an individual to an LLC, with a wide variety of opinions on the due on sale issue.

The reality is that there will be some distressed hotels coming to market, but nowhere near the level that people think.

@John Morgan thanks for your response, that would keep the family relations on a reasonable level.

Will property values decline as each summer produces fires that potentially level homes?

Once she has cleaned her mess to whatever level she wants to and then leaves, she is gone.

Here's my take on the scenarios you laid out:Scenario 1:  Since Partner 1 is bringing the deal, the experience, and the high-level leadership of the deal, Partner 2 is the Money and the day-to-day oversight.