In the end, you have to mitigate your risks as well.

Hopefully, this will be challenged in court so this very dangerous infringement on property rights is not upheld. 

Reality is far different than theory.Read "Long-Distance Real Estate Investing" by David Greene to learn how to analyze a market and build a team that can help you avoid these mistakes.From your experience, would paying for a really good property management co. help mitigate some of these issues?

New floor, new roof, new appliances, subfloor repair, removal of dangerously large trees, full yard landscaping and irrigation install.

There may be multiple (professional) work arounds that can mitigate it for a lot less.

Grouping properties would seem to only mildly mitigate risk and even that doesn’t seem worth it.

A lease mitigates risk and allows the owner to have legal recourse when done properly.

The caveat is that you're still getting "acquisition" financing at the purchase price and not the as-is value, and may not be at 90% (depending on the lender), but that will be mitigated by rehab financing to help you add value to the property.

They will do incremental disbursements to mitigate risk.Are you experienced with new constructions?  

The Property Manager of the upstairs unit didn't do anything to mitigate the damage in your unit and refuses to pay for it.