Does anyone know of legal authority for this issue? 

We just met with two pro cleaning companies and had the opportunity to try one out so far.

Then call their references and escrow company to see if they even know him. 

Have you interviewed property management companies?

The little handyman at the PM company I work with in Dallas is asking me investing advice and wants to take a HELOC on his dad's house to buy some properties....just hearing stuff like this is so wrong.

Bian- I co-own a HOA management company that specifically works with smaller buildings. 

There are several National Insurance companies that could easily handle 1.6M. 

The legal aspects also scare me a bit, but that's mostly out of ignorance rather than knowledge of what goes into it.But since I've read a bit more it seems that hiring a PM might not be in my best interest.

He is now selling the property and the new buyer says she cannot find an insurance company that will issue her a policy because it doesn't have central heat/air.

Maybe you could contact a local STR management company and work for them for free to get some idea of what is to manage a STR.