I also agree about making this a legal entity for protection for the both of you/

On the flip side, if you pocket the money and let the PM service suffer since you travel alot and can't answer tenant issues such as leaks and other important issues on a timely basis, then it may backfire and cost you more by neglecting your tenants and unit condition...

This is going back a ways so my recollection may be wrong.A litigation guarantee is issued with respect to some legal action (a quiet title or foreclosure for example) and is geared towards identifying parties to the action and protecting you from future claims of omitted parties.

You said "underwriter for our homeowner's insurance is requiring renters to have a renters insurance policy for no less than $300k in liabilities"Are they truly requiring the renters to have $300k in liability protection for themselves on their renter policy?

What went wrong, and with the benefit of hindsight, what might you have done differently to protect yourself?

It's hard to disclose away your responsibility to protect sellers and get them the best price possible.

If you have adequate coverage and a decent protection plan in place then you should be fine.

Does that mean I can discriminate against protected classes in my lending?

@Richard D.I agree, judges do tend to side with the tax suit defendant/owner in these cases and Bankruptcy courts are there to protect creditors and losing a major asset over a few thousand dollars in a property tax suit doesn't fit their charge. 

Don’t pay the mortgage on time and have the insurance policy lapseIf something’s late the mortgage company is going to investigate it.If there’s no insurance on their investment, the mortgage companies going to investigate it.Now if interest rates rise, there might be a reason for lenders to look at their portfolio and review everything.I don’t know, I just know that if you buy on a wraparound mortgage or sub to, and take care of make the payments on time and insurance, and you some kind of trust to protect yourself, youre in pretty good shape.