A couple additional things for you to consider: An interesting datapoint may be to look at other options.

I did not have to consider an extortionate cash for keys amount to a tenant.  

@Jacob Hollister ,I'd consider an LLC taxed as a partnership for all of you just to be safe.

., this is not a wholesale prospect), but he might consider an owner-financed option.

The dwelling coverage does have a big impact on the final rate.If you choose the latter option, it can be cheaper, but you would want to consider an endorsement for replacement or repair cost on partial losses, otherwise any loss, no matter how minor, would be subject to depreciation.

Take the same $100,000 listing, and you would consider an offer of $90,000 to be lowball, not genuine, and not worthy of a response?

I don't know if this would provide the same protection so you would still want to consider an umbrella policy.  

What do you consider an acceptable margin of profit vis a vis the risk?

it may have been covered here but as you may know, if you occupy the property you may consider an FHA loan. typically this would require 3.5% - 5% down payment - as long as you can satisfy the "occupancy" criteria for whatever period of time, could be something worth considering. 

If you decide to move forward you may want to consider an owner-carry component with certain earn-outs to make sure you are not overpaying for the business.