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.

Consider an I/O ARM, like a 5/1 (with little to no pre-pay penalty). 

Before I would go with a large increase, I would consider an incremental one as a landlord should factor in lost rent and renovation needed that occurrs when there is a vacancy  

I see some value in creating a relationship with another investor, but at that kind of distance and assuming you don't come across deals in that area too often...might consider an "in cheap out cheap" exit strategy.

A real estate agent won't be needed for the HELOC or refinance, but you should probably consider an agent to buy rental properties.

If you weren't living there and it was 5+ units you could consider an LLC but you'd only be limiting yourself in this instance.

@Ari Hadar The objective is to get the property in contract and then enter due diligence...I see this frequently with new investors...they always perform due diligence up front and then consider an offer.

You should consider an Assignment of rents/ Deed in Lieu/ personal guaranty etc.

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.