Should i consider an ARM even if initial rate is similar.

If for protection- consider an umbrella purpose. 

It sounds like you are looking to purchase a rental with a conventional loan, which means you would need to hold the property in your own name and consider an LLC after closing potentially. 

What would you consider an acceptable payment for a walk through and conceptual rehab estimate? 

HOWEVER, it depends on what kind of money you have to spend and what you consider an acceptable return.

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is likely to be higher, then you may consider an umbrella insurance policy.

PM me if you want some information on HUD's 232 program to get up to speed on the details.As a side note, I wouldn't consider an ILF property as a possibility as they are almost impossible to finance.

Do not consider an applicant until you have a complete application from them.

In other words, you may only be able to build out the multi-units up to the zoning density limit, and then they would consider an adu.

Lastly seller's with a low cost base, could consider an owner carry, in which the transaction would not necessarily be subject to a third party appraisal or conditions.