Not if insurance paid for it.

This is why it is sometimes worth your while to delay your tours until you have several lined up over a weekend, and let parties know you'll be making a decision at the end of the weekend.

He had insurance on the S-Corp for one million and none for himself.

The triplex is much more popular with traveling work crews for specialists in the trades and insurance relocations, so if we were to do it again, I would probably worry less about making each room it's own rentable space and save a little bit of those costs. 

This is not a great return, but not terrible.As others noted, there are other risks, like having the property insured at full replacement or purchase price, or if the option is 100% seller financing with no money down or very little, versus 20% traditional down payment, this can start to move it into a better investment.

Another idea that we have been exploring is using the cash value of whole life insurance funds for emergencies. 

At the point I made that decision, I didn't even know about self-directed IRAs, I just knew in general IRAs had a bit more flexibility.  

Both investors made the same decisions and bought similar deals. 

You might try corporate housing by owner, or try getting in contact with some insurance companies for replacement housing, or traveling work-crews, etc. 

It can be done ethically, but you need safeguards to confirm mortgage & possibly property tax payments made on-time, as well as insurance with you protected.- Also, you need a legal way to take back the deed if buyer defaults!