However once you've gotten through all that red tape it's pretty nice as the rents are high & consistent.

This should be a red flag.

I've got 4 single family houses in Red Deer that are insured through Wawanesa.

Step one is to verify that the unit is being well kept...... make sure she is as "good" a tenant as you think on all the other matters...... chronic late can be a big red flag for other issuesIf there are zero other issues I would renew it to M2M and increase the late fee to the highest allowed in your state...... next step  is to automate the process as much as possible with reminder emails etc.....if I can make more $$ with very little work, then fantastic.

There are numerous significant red flags here; Financials, title, rent roll etc. 

Your lack of experience will be a big red flag to cash investors.Assume this is not your last deal.

My question is- does this arrangement raise any ethical or legal red flags that I don't foresee due to my inexperience?

When resining as trustee and adding the buyer as a beneficiary, & a non refundable earnest money is required this brings me back to my first question, how do I approach the title company without any red flags. the way I've learned is there are three documents that are needed.....

Is this a red flag? 

Most likely in the red if you have HOA fees.