I would look at it in terms of whether you can afford a worst case scenario where you're covering the deductible and have a credit line or cash to front the re-build cost and getting reimbursed from insurance afterwards.

If you are running a LLC for your rentals is essential that you keep all business  funds in a separate account I like Credit  unions the best .

At this point, I would recommend having a line of credit to cover these things so you don't have money sitting in the bank doing nothing when it could be put to work.I have 33 units, no debt except for mortgages, and excellent income.

I have also have saved almost $50K so far to take a start in this game and also my personal credit score is above 750.I'd like someone to guide me purchasing my first property and want to kickstart with a small property first.

So I get this referral from a relative about a tenant who has good credit score, no criminal history, and a good paying job.

Also, townhomes are a great bridge property, it's a common trend that those in townhomes are aspiring for home ownership meaning credit sensitive and with that right mindset. 

When you go to a Bank or Credit Union, they can only offer you what products that bank or credit union offer.

Credit unions, banks, mortgage companies and private lenders.They all had the same answer.

I could be misunderstanding how this deal was structured, but wouldn't the seller who is on the underlying mortgage have an incentive not to let it go into foreclosure since their credit is at stake?

What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.?