Is this standard? 

Lenders that would do that already went out of business, and/or stopped offering it, in 2022/2023.To get the 11% lender on board, you'd needing to be looking at a property with vastly more significant upside than a standard ho-hum annual 5% rent increase.A 30% vacant mismanaged apartment building would be an example of where the 11% lender would step in, and ACTUALLY make it to the finish line.What you are looking at right now is someone that's going to garner 20 applications with the hopes of finding 1 or 2, with enough upside, to actually fund.

I am now able to offer 85% LTV on a purchase only.In terms of a cash out refinance, the industry standard is a max of 75% LTV.

In this case, we tell the tenants we have two requirements, one as long as we don't hear complaints and the grass doesn't touch the house that become a liability for the building, and at the end of the lease they turnover the property with the landscape in the same condition as how they moved in, then however they want to maintain the lawn to maintain that standard, we don't care.

However, let's say the lender were to foreclose on an existing PadSplit, what has a larger buyer pool: (since any lender that want's to foreclose wants to make the disposition of property as seamless as possible), a standard SFR, or an SFR with multiple modified bedrooms/faux walls?

Find a buyer who will offer you a typical standard transaction or you may be messing around with a seller financed deal for 6-12 months and then it falls apart anyway.

My insurance provider has given me a warning that this will change my insurance from a standard dwelling/fire to a surplus line, specific to undergrad tenants. 

Make it a standard practice to show all of your tenants where the main water shutoff valve is and label it clearly so they know how to shut the water off right away if something like this happens.

If you bought something more standard in Ohio you could do MTR there and have less turnover and less furnishing expenses.

Additionally, title companies and may have an internal real estate attorney to help with the contracts and sale.