You can achieve the same protection with Umbrella liability insurance.  

I'm just starting out investing rental properties out of state and I keep going back and forth on whether to structure it with a sole proprietor with umbrella insurance or starting an LLC in the state I plan to buy properties in.

Once the umbrella insurance is established, you can add your investment properties to the umbrella.To summarize:1.

Any other house utilities, like outdoor lights?

Smart for you to keep reserves on your own, however, but I'd never want them sitting in the mortgage companies bank account.In addition to letting your insurance agent know you need Non-Owner Occupied coverage now, you may want to entertain getting an umbrella policy as well for liability reasons, especially if you will not be putting this house in an LLC or trust.Also, talk to your CPA and make sure you understand fully how this will benefit you from a tax strategy perspective, as well as the documentation you'll need to keep and provide each year.Lastly, I would allot 8% to vacancy, 5% to repairs, 5% to reserves/cap ex, and 10% to property management, or 28% total ($364)

Does it include an umbrella coverage?

Does this second building fall under some sort of umbrella where I can rope it under the first property since that was all under my first mortgage and the two lots where included under my original residency purchase?   

For someone who is just starting wouldn't a personal umbrella policy accomplish the same thing?

Either that, or that really are just regurgitating someone else’s stuff.Let your income lead your expenses, not the other way around – I have to confess, I heard this from a free real estate course, not personal advice.However, I have found this to be very valuable.It’s amazing how quickly you can spend a lot of money and/or get into debt because we think “we have to spend money to make money”.We get in a hurry (remember #1) and think we’ll make all the money back in just a short time period.The gurus are great at convincing us that their course will pay for itself and we believe every bit of it.Instead of going into debt for education, pay with cash and from your previous income, not your future possible income.Remember, “results are not typical”.Don’t worry about incorporating in some other state – This actually came from an attorney friend who said if I felt I needed a Corporation or LLC to use Nolo Press and to do it myself.Contrary to what most of the gurus say, you can look up the parties in Corporation and LLC in Nevada and other states.In addition, most states will require you to register with them if you do any kind of business in their state.So, if you’re going to form an entity, just do it in the state you are going to do business in.Don’t form an entity until you have done several deals – This seems to be one of the first things newbies want to do – and I was one of them.What the guru’s don’t tell you is that you’ll probably have to pay someone to do your taxes for your entity which will add extra costs.They also fail to tell you how difficult it is to work with banks as an entity until you have several years of tax records to prove you’re successful at the business.If you haven’t done any equity or assets, use liability insurance and a personal umbrella policy.It will be much more effective and cheaper in the short run.After you have done several deals and have assets you want to protect, then you can form your entity.

Have you considered adding something to make it a little more "sexy" like mounting a flat screen TV to include with the unit, including an outdoor grill, or adding black-out curtains in the bedrooms?