I'm having difficulty finding insurance for this arrangement. 

They have more skin in the game then you do.Make sure you get clear title.

I see you're looking at buy and hold for long-term passive income - but there are few different ways to skin that cat.

The problem is difficulty in matching houses sold to the house I am working with (there's actually 3 houses in the same 1 mile radius).

It will be extremely unlikely that you find a HML to give you 100% funding on your first deal.They will all require you to have a down payment and some skin in the game.You will also need funds for rehab because they typically reimburse you afterwards.You'll either need to save up or get private money (friends, family, etc) for the down payment.Otherwise you can always explore creative financing options like seller financed deals, etc.

The difficulty ins sub metering is that I don't believe that my plumbing is split by unit.

As many mentioned here, you will have difficulty coming back to the Bay Area market if your sold your only property. 

Also the distance it needs to be moved and how many traffic lights,power poles,trees,etc. there are with hills and road turns leads to difficulty.

I love the AirBNB model, I don't want money showing up in my bank account until the guest is staying - advance payments make bookkeeping really difficult (I don't want a bunch of $ coming in in Feb-March for summer reservations, then very little over summer months when the properties are actually making top dollar!)

Lots of difficulties to overcome, but I know things have been turning around.