You can surely set up a seperate entity for property management to defer some of the liability but you are still in a danger zone.

Additionally having high equity in a rental kills the cash flow and turns a investment into a liability.

Do not use a partnership but an LLC - otherwise people could be picking up liability and debt even though they might have minority interestsBest wishes

You may not be able to charge them if the toilet handle "broke" due to "normal wear and tear", but at least having the proof that it was serviced and you educating them (in writing) on what to do should a toilet overflow again in the future (shut-off valve) could protect you from liability later on.

New Tenants agree (prior to taking possession of the premise), are required to provide the Landlord with a Property and Liability Renters Insurance Policy with a minimum of $100,000 liability coverage.

They might require investor be syndicated as taking non-accredited investors opens up more liability and there is more documentation needed from the investor.Example an investor with 25k to invest that is worth 100k could claim ignorance and being taken advantage of in a field of investment more easily than and investor worth 4 million who has a track record of investing with private placements.Kurt how much are you looking to invest?

So does having my own liability coverage add more protection in this sort of scenario?

The liability for the HOA could cause problems.  

I just want to maximize our cash flow without jeopardizing liability issues that comes with strangers living together.

A holder of a note with mortgage/DOT is a lender and controls the property through the security instrument with the borrower carrying the burden of ownership liabilities.