The big old 1830's home is apparently haunted so I guess it was a natural fitWe re-wrote the MTM as a Commercial NNN, raised the rent significantly, insisted on them holding commercial liability coverage.

It also appears that you have not accounted for any repairs or replacement reserves so I think your Net Operating Income for any given year is going to show a more significant loss than what you have indicated.The bank is looking at your Debt-Service-Coverage-Ratio (DSCR) and is flagging it because your rental income isn't sufficient to coverage the debt. 

And then as I expand how the structure and coverage will/should change.They are both in an LLC's (separate).

I am hoping someone can provide me with some examples regarding what kind of insurance coverage and business protection (specifically structure LLC, S-corp, C-Corp and the best combo for tax strategy) I should have for my two townhome rental properties now.

I am curious to hear who everyone uses for Insurance Coverage - as far as Carrier Goes? 

You could also check to see who other owners have uses and who your agent recommends.Just because you start a claim with your company, you are not prevented from also putting a claim in if you find that she has coverage.   

I don't know what you've baked into your cash flow number but with another $2K/month of "buffer" expenses leaves you with $72,000 NOI. 72,000 / 599,000 = 12% CapAnd you have PLENTY of Debt Service coverage on it assuming 25% down at 4% amortized over 25 years. 

Thank you.If the property is not rural, just get a dscr loan (debt service coverage ratio). 

The underlying reason Federal Pacific panels are frowned upon (or denied coverage outright) by insurance companies is they tend to catch on fire. 

It's possible that policy would include some property damage coverage.