You have to weigh the risk of potential vacancy.

If so, it would be a great idea to do a house-hack BRRRR so you can gain hands on experience before you take more risks.

Or should we accept the potential loss on the second room if it remains unrented?

It depends if you're looking more for in-place cashflow or potential future appreciation.

It also takes out the risk of losing the property to the bank.

There's a lot of risk and it's highly competitive today.

We have the funds now in order to do more than we think even, but I am also being conservative as we are not used to such risk and have been doing CDs and mutual funds instead.

I have investigated several out of state markets and have not found anything that I like better than what I am investing in now when comparing overall income, expenses, and the potential for appreciation.

Instead, it's about identifying the ROI that aligns with your investment strategy and risk tolerance.

If your agent isn't knowedgable they can over or undersell you and that will affect your costs.An umbrealla policy was reccomended to me by my agent (a family member) and in general I think it is a really good idea and usually a  pretty cheap option for risk mitigation.I don't have a specific company to reccomend but hopefully this was helpful.