I always got a DP3 policy with $500K in liability coverage on my SF rentals.If grandpa is living in your place, his personal items are not covered.

Multifamily is the only CRE asset class where the government actively subsidizes the cost of capital via "the agencies" (Freddie / Fannie / HUD). 

I believe there is only a handful of title companies that will issue policies on tax lien foreclosures.

So, it's something you need to be aware of and consider.If your goal in moving the property to an LLC is to protect yourself, it might be simpler to buy an umbrella policy to cover yourself against any issues.

Personally, I would eat the money up front to get someone on schedule asap and work with either the bank or the seller for a credit at close.If there is roof damage, that would be an insurance claim on the current owner's policy. 

Most policies have limited coverage for contractor mishaps.3.

I would want some major security deposit on file - maybe 6 months rent (personally), and / or possibly have them carry an insurance policy with you as the named insured for a descent value for any damages, etc - with the policy specifically written for the type of business they are actually running.

The only way home warranty companies stay in business is by selling policies and not paying out.1.

I do have an umbrella policy but am simply adding more protection by moving to LLC.

Have you heard of Bank on Yourself-type policies?