Generally speaking when you find more owner occupied properties and less rentals you're in C+/B class.

Account Closed a PMC has two options to get liability insurance (tenant slip & fall) protection:1) Get added to owner's policy as Additionally Insured (NOT named insured).2) Setup a master commercial policy and add every property they manage to it and then charge those owners the cost of the policy.Otherwise, a PMC CANNOT get liability coverage on a property they have no ownership interest in.So, nothing wrong with their request.

The owners refused my advice to reduce price and they both sat vacant for months.

This vary heavily town to town. 20% down is great if buying strictly as investment but if you have a way of owner occupying I would explore that route and apply the 20% down to increasing value of property and instead using low money down loan. 

I currently manage a portfolio of 17 STRs, some are mine, but a majority for other owners.

Could you share a bit about how you identified the builder you eventually decided to work with? 

I wish all the STR owners luck.

He kept cash and investments on the side should he decide to get back in, 5 years from now when they come back.  

They were referrals and the business started to grow simply because I had a competent team that was responsive and looked out for the owners' best interests.

Maintenance at at PM company or one of the big hedge owners like AH4R, leasing at apartment complex will teach you a lot about applications, fraud, leases, collections, evictions.