Commercial property usually allows the tenant to make improvements suitable for their business but you need to set limits, establish an approval process, and decide what happens to the improvements when the tenant leaves.You can get by treating it like a residential but I highly recommend you learn how to run a commercial property and get all the benefits of that investment.

First, I would say don't limit yourself or discount what you are bringing to the table.

I should be covered through insurance.So, finally, my question is: how do you limit your exposure to legal liabilities as you your real estate net worth grows, assuming traditional mortgages remain an essential part of your strategy (i.e., an LLC won't work)?

It's not a dangerous breed and the insurer doesn't have limitations anyway.

I have extracted all of my investment (purchase and value add costs) via refinance).My recommendation is to not limit yourself to the high cash flow properties to achieve your ROI goals. 

They moved from Cali to Wisconsin a half-decade ago due to the high cost of living on the west coast, which limited their investing opportunities. 

That limits potential fraud.

I do have very limited time at the moment, given my job and two kids (3yo and 3mo), but I have no problem getting my hands dirty or doing what it takes for some freedom in the future.

If I had a limited budget I am buying a laminate floor that has a thicker base 10-12mm than an LVP floor that is 3mm. 

So again, we are using a business practice that works which is limited by how much it can scale, and that once again puts a hard cap on how many units we can run successfully and how passive this business can really be for us.