I'm pretty well convinced that if you are in real estate for more than a minute, at some point you WILL get involved in a law suit...even if you think you are playing by all the right rules.

Have you potentially thought about analyzing SFHs that contain an in-law suite that could be converted for Airbnb use? 

In the event of a lawsuit, the plaintiff sues the management LLC but cannot touch the holding LLC since they never deal with the holding LLC.

If she starts the legal conversion process with the city while the tenant is still there, I can imagine it would be quite a painful process, because the city would force her to evict the tenant immediately and the tenant could complain and file a lawsuit.

If you fail to follow the rules, you may open your personal assets to a lawsuit.

Buying a home that have an ADU,or extra rooms that could be convert in a mother-in- law suite, or the ability to built an ADU, mother-in-law space could be awesome.

Reason I say that is I have seen people make these claims on a REO and the owner / lender has never been in the property / or if it was an heir.In regards to lost rent and lost work time, those most likely would not be covered in any lawsuit and possibly cover the remediation work but you would need to confirm they lied, and then even if you won and got a judgment - you still may not be able to collect it.Unfortunately you could lose more fighting this and may have to chalk it up to always get water and power turned on when buying a property

I am looking to house hack with a duplex/SFR with an in-law suite or BRRR a low-priced SFR since I am limited in my budget (roughly 175k max).

If you put properties in your personal name, then you are exposing your properties and your personal assets to a potential law suit.  

If you are asking these kinds of questions, you could really hurt a seller if you make a mistake or even open yourself up to a lawsuit.