In conclusion, selling the property is the best course of action due to the negative cash flow and potential opportunity cost.Good luck!

Those tend to be the smaller type of deals of course and in more tertiary markets, but not a bad strategy.

Do I just leave it as is (of course making sure I’m covered for liability) or do I fully insure and continue applying for the loan?

Of course, with all things, the answers to all these matters will depend on the circumstances.California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts.

And of course the HML wont or should not allow them as a default will cause the first position lender to have to run through a full default/foreclosure to wipe out the lien. 

Whether you want to buy a 2-4 unit place where you live in 1 unit and rent out the rest or do something like a live in flip (where you fix up a house over the course of 2-3 years, move out and sell it to capture a tax free profit), it will mitigate your risk because it is where you live. 

Learning about real estate investing can be found in books, podcasts, online courses, and relationships with investors, lenders, contractors, and mentors.Good luck!

The problem of course is that they always fail to mention the fee structure that is hidden on page 157 of the 200 page insurance policy handbook that they give you that describes how the policy operates.  

. - if you need two stairwells and an elevator, that will of course drive costs way up and it also eats into your floor plate area and can crush layouts on a smaller building, possibly turning your small CMX2.5 lot you'd planned to build 5 stories on into what may as well be a CMX2 lot and allow only 3 stories, since you can't actually fit 2 stairwells, an elevator, a hallway all the way through from front to rear, a small lobby, a mail room, etc.

Of course it has to level off at some point - but the data shows the net migration increases out paces the housing units in both for rent and for sale.