So, if a loss occurs while the property is being repaired or renovated, coverage would apply, correct?

If you aren't going to set up the LLC correctly, for asset protection structuring, you might as well buy it in your personal name.

Make sure you setup your Goals correctly so you are measuring things like phone calls, contact forms, tours scheduled etc., 2.

@Tim Bergstrom you correctly pointed out some of the hotter areas of town.

If I remember correctly, there is a provision for properties with Fannie and Freddie loans to be moved to single-member LLCs after 12 months of seasoning if the only member of the LLC is the owner/borrower on the loan. 

Hey @Raghavendra Pillappa, late to the party here but everyone said it best.I wouldn't move forward on this until you find out all the details on if the septic can be expanded and if things were done correctly to add the bedrooms.

Because when I ran the numbers myself it was a loss of closer to $14K, not $22K, so I want to make sure I am doing it correctly and conservatively. 

Most who get tripped up are those buying the smaller multi-families that don't possess the correct use permit/historical rental license activity. 

As others correctly noted, as a landlord you must look at the big picture and if this happens to be a good tenant who has occupied the unit for a while, has a history of timely payments and has expressed interest in remaining at the property the value in an extension (assuming that is advantageous to you as the landlord) should be placed above your desire to collect rent in a certain method if this particularly tenant has strong desires to make their payments in a different manner....especially if the lease they signed allowed a different payment method.

You are correct; it would be awkward having two different parties staying on the property.