I've thought about offering $20,000 every 6 months for 3 years and a balloon mortgage to cover the remainder... 

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

I also have a down payment assistance program that covers 3.5%-5%, and does not require you to be a first-time home buyer. 

Anyone know of a home owner's insurance company covering Lansing Michigan area for a 4 unit with additional accessory unit for a rental built in 1917 ?

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

If that's not the case and the GC still requires 1/3 payment up front,  it means they have other projects that are suffering or lack quality subcontract relationships and can't place them on net 30's and when contractors are moving money around to cover for other projects,  that's a slippery slope. 

The major concerns to me are the roof, the hot water heater, and similar.  

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

I am afraid that I will blow my cover this way lol?

I just finished my first BRRRR and that process was a little annoying with creating the scope of work, capturing and uploading receipts, getting a wire to cover the costs, etc.