The advantages of the Solo 401(k) are:Higher contribution limits than IRA based plansAbility to make contributions of up to $24K on a Roth basis, without limits based on incomeAbility to personally borrow from the plan up to $50K for 5 yearsExemption from UDFI taxation on mortgaged real estate investmentsStronger protections against creditors in cases of personal lawsuits or bankruptcyLess catastrophic penalties in the event of a prohibited transactionThe advantage of a self-directed IRA is a certain simplicity and permanency with no need to maintain ongoing self-employment.

He's probably 60, and pending some catastrophic event, from what I can tell he wants to stay there till he dies.2. 

You don't want some catastrophic problem with one property to kill the whole business.

Which of those costs are worth it to you are based on your own situation, and likely will change over your investment career.Personally, I don’t want to think about where my money will come from in the case of a catastrophe, so we are building to a year of PITI payments for each property.

IE a water heater goes out - insurance would be more for catastrophic items such as a windstorm blows a big branch down on to the roof, or a fire, or something?

All it will take is a small catastrophe in your life and you will be forced to sell at a major loss.

But in the event of something near catastrophic it is very useful to have credit cards available to help handle something major.

Insurance is only used in catastrophic situations.

For a flip you are not insuring for the small things but large catastrophic things like a fire. 

My personal choice is to find properties built in the late 90s early 2000s so that I can try to avoid catastrophic repairs, and avoid code issues.