The original plan was for the tenant's side to pay 100% of the mortgage / taxes / insurance / PMI, while I cover trash and water for both sides. 

- Regarding liability, definitely consult an attorney and or insurance agent regarding the type of coverage you need.

Would it make sense to get a realtor involved even when I initially made contact with the homeowner?

Unless the tenant vandalized the property your rental insurance pays for damages from such instance.

Is there insurance?

There are some HOA's out there that will only allow a certain percentage of units to be rented out and may have some other restrictions in the CC&R's.As for your question, the "best" way of doing something in real estate is typically subjective, but having a HELOC payment, in addition to the mortgage, taxes, insurance, and HOA dues, just increases the chances of having a less profitable property or one that may not cash flow at all.

For me cash not earning it's keep is not acceptable.If I were presently invested in SFHs, which I am not, I would be selling now at the present high of the home owner market and reinvest in multi unit/apartments.

Most HML don't want to follow those expensive and complex rules, so they just say no homeowner loans.

Personally I choose and LLC for all my properties.Of course LLC or not you need good insurance.

@Aram Velazquez Our primary house has only me on mortgage yet when getting investment property on my wife’s name, lender considered her responsible for 100% of Insurance and property tax (because title is in our joint name).