I bought a unique property in LA a little over a year ago with the intent to Airbnb it, only to find out that it is 100% illegal to do short term rentals.

There are a select few from the majority that mean well, I'm sure you are aware of that.

He only works one or two projects at a time, and is somewhat selective about who he works with, what kind of projects he takes on and what geographical area. 

Instead, it is much better to roll up your sleeves, and diligently hunt for the right deal, be highly selective to make sure you buy a great deal, force appreciation if at all possible, and get in such that you can stay in through thick and thin if you need or choose to ... this will open up multiple exits and tilt the odds in your favor ... heads you win big, tails you win a little, but the house always wins and you're the house ... if you are unable to stack the deck in your favor then the best thing to do is not play the game until you learn enough to from those that do ... people sometimes say that going for appreciation is speculation and if you get it it is only because you are lucky ...

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There are a few things you might consider doing after you select your niche and market area.One of those things is to form some type of corporation or a LLC.  

And, yes, insurance appears on IRS Form Schedule E:I, of course, and not a tax professional, and am not up to speed about what might be unique to your particular situation that prevents being able to write these things off.But you might want to consider hiring a better tax guy, if you're being told that you "can't ever" write off property taxes!

The tenant selects a friend to friend setting for a fee free ach.

what are some unique was you started out in real estate investing with little money.... please share

I also very carefully selected my PM because they are extremely proactive and easy to work with, which has been very helpful.