I know in Florida, these types of situations can become difficult from a legal standpoint. 

Those tend to fall apart more easily or lead to a difficult escrow process.

.- Setting up operations for SFR from scratch is very difficult.- One investor is buying at cap rates in 5s or 6s.

Both were difficult and could have been avoided if we had had better planning.

If so, it may be difficult to start a new assisted living facility.

The owner-occupied portion makes things difficult, what options do I have? 

From what I hear the Texas insurance market is insanely difficult right now.I'd call a couple brokers and let them shop the coverage for you but that might be the best you can do.

I have found it very difficult to find an effective property manager to manage section 8 tenants.

Andy, I'm sorry to hear that your going through this, I don't personally know anyone dealing with such difficult tenants, but do know several Brooklyn based land lords who got tenants out in order to do reno. or dramatically increase rent. 

Its never easy when someone is either stiffing you on the rent, damaging your property or just being difficult, but it does get easier to deal with later on.