Crime is a concern, but I'm thinking with the appropriate limited liability and insurance structure this could provide a reasonable shield.

Yes we always account for R&M, capex, vacancy, insurance, property taxes etc in our numbers.It's definitely NOT all properties that are cashflow positive, but we are still finding them.

You'll want your PL named as lender on the property insurance policy.

Across all the pieces needed to come together to pull a RE transaction off: Borrower - Lender - Insurance - Title - Sometimes Broker. 

YUP very easy work around for this but it does take a lender who will be a little less risk adverse than bigger HML that will simply say no title insurance no loan..

.($175,000 / 20% = $875,000)Of course, the buyer can put less than 20% down and pay private mortgage insurance, but let’s say they really want to put 20% down.As a seller, you have now reduced the pool of buyers who can pay $1M for your home since the buyer needs to save more money to reach a $1M purchase price.So, would you rather make $875k and “save” money on commission, or make $975k and just pay their agent?

Update your insurance.If they do, inform your insurance company about the change in your property's use.

So I believe mortgages will look at DTI and want to make sure your income covers your current and future debt obligations at a percentage of 40-49% I believe, so their multiple would be more like 2-2.25x, but it's not a real apples to apples comparison. 

I'm currently paying $4100/year for insurance, and when it renews in October it will go up to $5500/year.

Is the tenant still obligated to pay rent during the time they can't access the property?