This is where you can lean on a reliable agent to prevent you from buying bad deals but I would also make sure you do enough research before making offers. 

I feel maintaining your properties correctly and being decent to your tenants is the best preventative measure we as landlords can take next to LLCs, insurance, and umbrella policies.

I would happily spend $2 to save $1 if it prevents the extorsion.  

With an attorney handling the eviction, you can not only ensure proper handling but also take advantage settlement agreements to prevent having to restart the process if the tenant were to default again and get automatic final judgment when the tenant defaults on the settlement agreement. 

I’m concerned that holding this note may prevent me from closing on future deals due to DTI ratio.

Though accidents could happen, 99% of the time these issues that most people need to get policies for are due to the lack of common sense or for someone accepting responsibility for their actions. 

Maybe you need to upgrade the properties to prevent some of the headaches?

But again, make sure none of them will prevent financing.

Insurance is in the business of making money; protecting your pocketbook is a by-product, so they will do what they can to prevent a big payoff.

Example: the intention of Passive Activity Limitation (PAL) rules is to prevent high-income earners from reducing their taxes by merely investing money into real estate.