I would in a normal course of a rehab replace cast iron lines on the interior of the home and basement if they are accessible and if I already have a plumber there doing work as those are cheap and easy to replace at that time.

But of course, you need to be very careful about the risk of starting a trade war.  

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. 

Austin, that is exactly the train of thought I had.

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!