I would think that it excludes the common areas.   

@Adam ReadI agree with Wayne - The seller will be eligible to exclude a portion of the capital gains if they owned and lived in the property.

The way to avoid it is to invest either via SEP or solo-401k which are excluded from such taxation. 

There are currently tenants in the property who agreed to let me take pictures excluding her bedroom.

You're still eligible to occupy 2-4 unit properties with FHA as well as SFR, and the military eligibility provision shouldn't exclude you from that.

Liability covers losses like leaving candles burning, house burned down because of their negligence, etc....Water in the basement not due to flood is most often an excluded risk, whether you are a tenant or a homeowner or a landlord. 

I'll give my $0.02.In a lenders policy (which is I believe what we are discussing here), unpaid real estate taxes would be covered.However, this claim would probably be excluded under the exception for losses created, assumed or agreed to by the insured claimant -- because OP is refusing to pay a bill he is responsible for.

I know FHA and other primary mortgages have a 1 year stipulation for homeowner use and certain reasons you can be excluded from that requirement.

Items connected to wear&tear, capex, etc are excluded. 

The investor survey I refer to clarifies that the cap rate excluded cap ex reserves.