The umbrella policy covers your liability, not tied to only one property.

He isn't losing any money and he no longer has to deal with phone calls from his tenant and makes the same net money and he gets to depreciate his house and lower his tax liability. 

So from a rent collection perspective, if I have tenants on a joint lease - I "treat" each person as if they have their own lease, but with 50% of the liability.

I also choose to have umbrella insurance to cover any excessive liabilities that may occur on my out of state properties.

It can either be an asset or prove to be a liability depending on which you choose. 

@Wei Huang As far as what you could have done to avoid this mess, what I've finally ended up doing for my investor clients is having someone visit the property the morning of closing and - if it is not vacant - then you delay the closing and have the attorney hold the funds.This one worked out at the end of the day but, trust me, it could be much, much worse from a liability perspective. 

You liability goes way up should something go wrong - think fire and someone dies.

I think too that just having an LLC as a fortress for liability isn't going to work for you being a single member LLC and you doing the management, your best bet is insurance.

Although there is typically more due diligence needed at the front-end with notes, once you get over that hump,  the ongoing management is much simpler: no tenants, no contractors, no evictions, no vandalism and much less liability since you are not the property owner.

I’m involved in an opportunity zone fund, active syndicating mid-sized deals and am using the combination of cost segregation/bonus depreciation/ re professional designation to significantly reduce my tax liability.