I'm a pro studio and touring musician (drum set) living in the Williamsburg neighborhood of Brooklyn, NY.

As  @Ned Carey so eloquently stated, your grandparents are not helping the tenant, they're enabling the tenant. 

Another item is confirmation from the first position lender they will allow registration of a subordinate lien/mortgage {with many residential bank mortgages here, registering a second, especially w/o their consent, could enable them to call the first}.

Same idea, trying to push investors out, and to enable owner occupieds to compete. 

In theory I imagine that would enable the single policy to cover the others.But maybe it really is simpler than you think... isn't this the whole point of an umbrella policy, anyway?

I'll be putting 5% down so this would a) lower the funding fee if I went with VA and b) enable me to use FHA if the VA numbers don't make sense for whatever reason. 

Indeed, as the private economy inevitably suffers across the country and rental returns flatline, we look forward to offering strong returns to outside investors, in effect enabling us to suck up outside liquidity.

Seems you already expect that you will be taking a but of a financial hit so why not do the thing that enables your borrower to offer "cash for keys"?

Wise use of leverage enables you to do that much faster.

Doing this twice would enable me to rehab the entire building.