Due to a lack of space on the 2nd floor, there was not adequate space to add a 2nd bathroom so that I could have a master suite.

Generally, the nature of income as active or passive does not change depending on how you own it but how you create it.

Have any of you experienced similar unexpected or unexplained expenses of this nature? 

Might be doable, but your first hurtle will be the zoning of the property and next adequate parking. 

We've currently got, which I can imagine most others do, the mechanical timer where the lights will come on at a certain time and off at a certain time.What we'd love to do is have essentially is a timer that measures natural light and comes on and off when there is low light.

On the other hand, experiencing a natural disaster can be very damaging and an insurance policy can save the day...but does it really?

Not advising you, just speaking from personal experienceIf you do a lot of real estate investing under your LLC, where its a fulltime business and get to the point where there's adequate regular income, you may want to consult with a CPA about the option of electing to have your LLC taxed as an S Corp and take a regular salary and any additional distributions as dividends. 

So naturally am I afraid of buying at the "wrong time?" 

I tried everything Home Depot had as well as the natural stuff found at pet stores and on line.  

Naturally I'm more than willing to pay the security deposit back just to get past this and move on with my life, as this is not really worth fighting over, however the attorney is asking $1,500 in legal fees so the total amount they're willing to settle without going to court is just below $3,000.