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.

If you're not putting anything in, then I'd expect that your friend would want to get all of their capital back before you start splitting up the distributions.

@Amol KulkarniRecommend exploring as many sources as possible to get referrals AND cross-reference them to get as much accurate information as possible.Check out NARPM.com, BP’s Property Manager Finder (BiggerPockets: The Real Estate Investing Social Network), etc.Also, encourage you to learn from the mistakes of others - by reading posts here on BiggerPockets about owners not having their expectations met by their current Property Management Company.

@Shakthi Kamal read copy and paste advice below.For cashflow, you'll be looking at mostly Class C properties/tenants.Be SURE you UNDERSTAND what this means or your expectations won't match reality!

I reached out to the individual marketing the deal to schedule a property viewing, but they’re asking for proof of funds (which I expected) and a signed purchase agreement or LOI.Is this normal?

It's very different than Airbnb so don't expect it to work the same.

I tried calculating value based on NOI and cap rate (see below) but I'm new to this and the value seems to come out lower than I would expect.

A and B tenants, usually need more hand holding and expect more because they assume that they are entitled to it because they are paying so in rent. 

Quote from @Kody Smith: without getting too deep into my finances, what my strategy is...1. take loans to buy properties (leverage)2. fix/flip for day to day cash flow income3. use some of the fix/flip income to buy consistent cash flow through:- business acquisition, - commercial properties (MF and store fronts),I have no intention of doing ALL of the management myself, I will hire management as needed (medium term goal)my expected core role is money provider, evaluating the numbers, making decisions, and connecting with investors, wholesalers, lenders, contractors, and property owners.while I am just on step 2 of the journey, I am looking toward step 3 to stabilize, and not worry about if house prices drop mid project or not (or not worry as much) So to be fair this is more about obtaining and growing a real estate business not simply buying rentals for cashflow.

Ultimately, clear communication and expectations handled in a respectful manner can avert any issue.