It just seemed like a good strategy since these were government backed rental payments

Certainly not afraid of it -- the government red tape is Partly a question and difficulty removing a bad tenant is probably he biggest downside - that goes for any property though.   

This outlines things like guest/ overnight guest policy, cleanliness standards, roomie/tenant vs roomie/ landlord responsibilities...

Also, if you're working with a local bank, theyre likely choosing not to originate  Conventional loans for investment properties and to only offer commercial loans that they hold on their balance sheet, which are subject to their own internal credit policies.

The number one employer is the state government, because the capital is next door, and the number two employer is the federal government, both are not cyclical and don't fluctuate, if anything their job base increases. 

These will certainly specify the jurisdiction and venue for any disputes, as well as the governing law.

You have a mortgage on it so no one's going to go after you; you'll just need good rental insurance and (recommend) an umbrella policy. $200-300 per month isn't great, so make sure it really makes sense to keep it as a rental.

Probably go with just an umbrella insurance policy.

If not, you can get an umbrella policy from just about any insurer.

Does my homeowner's policy need to be updated to name the LLC as the insured?