In fact, you can have a tax liability even with negative cashflow. 

The thing that is very overstated here is the operating cost liability. 

Your primary insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits.5.

Hi all, I was getting excited and learning about RE investing , but came across this article which scared me a bit as far as liability and actually building wealth with investing.

Do not screw this up, the liability penalties would be huge since you're dealing with fire.

Does anyone have any ideas on how to minimize that tax liability and still continue with my original intent, or is my only option a 1031 (I'm aware of DST but don't see that as a great option).  

Renting where you live and owning elsewhere may not be traditional, but it makes more intuitive sense to cash flow 10k a year off of a 500k investment oppose to racking up a 3k/month liability off of a 500k investment (primary home). 2.

Insurance protects both you and the lender from potential losses due to damage or liability issues.

AB1482 states that "single-family homes/condos (residential real property that is alienable separate from the title to any other dwelling unit) are exempt from AB 1482 if (1) the owner is not a real estate investment trust, a corporation, or a limited liability company in which at least one member is a corporation and (2) the owner provides the tenant with a written notice of the exemption"The part that is confusing is "...a corporation, or a limited liability company in which at least one member is a corporation."

I received a quote for $3492 annual policy for RCV of $270,000 which also includes liability up to $2,000,000 (see list of liability covered).