There has to be a stabilization period...meaning your up front costs will be quite high...if you are not entering this deal with a stabilization plan, you'll be sunk within the year, wondering how your deal went south...What has your agent and property manager advised on this deal?

She has a five day grace period from the 1st to the 5th.

First, is there a Redemption Period in your state?  

I look at the amount of loan principal paid down in an annual period as a percentage of my cash invested at purchase.

We'll be losing rental income for that time period and some very good tenants.

However some states have redemption periods for tax deeds.

how many times during that time period has the house flooded?

Or is this a short term bridge loan (because you mentioned grace period). 

I would hire a company that warranties their work for a period of time.

In value-add deals, typically you are looking at ability to move yield (going in cap rate vs stabilized yield, and making sure that delta is large enough), IRR, equity multiple on deal, and maybe average cash on cash over hold period.