This process has led us to meet and become acquaintances with a few wealthy home owners.

(Long time home owner but this would be my first rental so I'm on the edge of the diving board, looking down into that deep dark pool.) 

THOWS can be useful to the homeowner who has a little extra land and wants a new income.

Some home owners, in my research, were unable to transfer the loan.

Will I insure this property under a typical homeowner's policy or should I obtain a landlord policy? 

No tenants - No turnover, evictions or chasing rent.No liability - No worries if a homeowner slips and falls.Secured - the investment is secured by real estate.Insured - unlike a stock, the collateral (property) is insured.No taxes and Insurance - Homeowner pays and TI is typically escrowed with the servicing company so no need to track.Notes are typically more liquid than rental real estate.Consistently higher returns - Typically double digit.Scalable - easier to manage several hundred notes versus several hundred rental properties.No HOA or COA - homeowners must pay directly.No property management costs - instead we pay a fraction to a servicing company to collect payments.

However, there’s a good possibility a homeowner wouldn’t understand what he’s signing.

My property taxes on that home are low, thanks to Proposition 13 (which benefits long time CA homeowners and investors).

I have a main homeowners policy for my big house through them, and they also cover all of my glamping sites in the same policy.

To address potential future problems, wouldn't a homeowner's policy and/or home protection plan cover any occurrences?