He asked a few questions that surprised us but not quite a red flag.  

Any advice on understanding how to read them, look for red flags, etc.?

That was a red flag. 

If a GC isn't solvent enough to get to the next draw, that's a huge red flag.

That raised a red flag for me...a lot of mortgages require you to live in the house for one year before you can rent it out.  

I still can't believe there isn't a carrier willing to write a comprehensive policy for this side of real estate.

The red flag though and it's big, is that you could be walking into a nightmare if the quality is not what you expect, if projects are half finished, or if the friendship between you all deteriorates because of your expectations not being met.

Also, submit the claim to your insurance carrier right away.

If you feel like there's more going on than they are telling you, that's a red flag for sure.

Carriers generally reach out to a property owner when they need coverage in that area.