Very unlikely this will happen, but the risk is always there.Some other thoughts are to consider an umbrella insurance policy (or rider) if you are worried about risk...but this does not limit your liability.

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.

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.

You can consider an interest only option for even better cashflow.

Or should I abandon this approach altogether and possibly consider an FHA loan (and rent out my home next door)?

...Hi Anna,That you do not know how to handle this (important) aspect of owning commercial seems (to me) like what you consider an investment might be a bigger risk than you anticipated.

If they are getting repeated police calls, I would consider an emergency eviction and get them out much sooner. 

If they don’t, I may look at a different PM, or consider an alternative. 

Hey Robin,You should honestly consider an investor cash flow loan program.

I would certainly consider an assignment if there's interest from the right developer.