As someone else mentioned, insurance here is generally less costly than in Florida and other beach markets. 

You could convert them to a DSCR loan but then transfer them to a LLCWhat we have done is save for down payments and renovation costs, - buy properties that need work rehab them and then refinance them out making sure it meets our dti.

$10K savings to you or higher cost to you? 

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

You should only be liable for tax on any appreciation since you inherited the rental (minus the cost of your improvements). 

Quote from @Patricia Steiner: There are several lenders who offer low/no closing cost options for first time homebuyers.

When I consider the risk and the rebuilding costs, I am surprised the insurance is not even higher price.We got a referal for our CA FAIR agent from the RE agent and they were real responsive. 

I have found that they worked really well when it comes to getting better tenants and better rents, and having less hassle, less headaches, and then getting a higher sales price; without paying closing costs or realtor fees.

Starting with house hacking is a smart move, especially in a higher-cost area.

If one tenant has been in there for that long, there will also be some serious capex and turnover costs.