It appears you've learned that lesson.Second, it's completely reasonable for the Tenant to be spooked and break the lease.

Denver city and county is getting tougher and cracking down a bit more, which has some landlords spooked.

I was going to live in there for a at least two years and consider selling it. the uncertainty with the short term outlook of the RE market also spooked me a bit  

here are some tips:3bed MTRs aren't as in-demand, so don't be spooked if you have longer periods of vacancy. you could consider doing MTR by the room, for all traveling professionals, to avoid those periods with zero income coming in. you'd be surprised by how many traveling professionals are willing to share a living space, to find affordable housing, especially if you'll allow pets!

I wouldn't be as spooked as you seem to be, but I would certainly check out 1) who owns the particular LLC in question with the state and 2) confirm that they have, indeed, been approved with a lender in the name of the LLC.

And what exactly do we need to tell insurance so they are not spooked and give me high premiums?

You'll either drive them deeper underground or they'll spook, the property will be converted to something decent, and then we'll have more homeless and people on government subsidies.It will be as successful as the war on drugs, war on poverty, and war on homelessness.

This is what is happening. non-QM is based on investor credit lines, when the market spooked, everyone pulled out and liquidity was erased practicality overnight.

spooks the investment world. 

In my experience most buyers are spooked by having to do anything more than changing a lightbulb, so first I think you need to decide if a rehab is truly something you have the stomach for.