Red flags all the way around. 

Because of them my proxibid account flagged.

It is very unlikely that you'll have problems/be investigated for just one instance, but repeatedly doing this will absolutely raise red flags these days.

I handle St Augustine/Ponte Vedra/Palm Coast but can certainly help with Jacksonville and based on your goals there may be other opportunities to explore.To cover off insurance from previous comments, the market has changed and it is competitive with new carriers entering the market. 

Quote from @Steve Tse: Hi BP, What insurance carriers can you recommend in Texas, as I am shopping around to replace my landlords policy that I currently have with Travelers ?

Are there any potential red flags I should be aware of?

I wasn't sure if asking my FHA lender about switching it to commercial will raise red flags.

I know, there are plenty of red flags there, but I do believe it is worth the risk when I consider how happy it makes my wife, how life-changing it will be for the family, how minor the financial impact will be on me, and how it gives me the opportunity to practice the steps of real estate investing with forgiving tenants.Finally, I am going to attempt to self manage as nothing comes close to cash-flowing if you include PM costs.

Don't see any major red flags here, so long as you are comfortable in the low income space.

Again, an attorney can help you determine if you have a strong stance/case against the neighbor or not.You also need to consider your own carrier's response to this claim, and perhaps even visit with them about possible subrogation.