An umbrella insurance of 1M~2M should be sufficient to cover our assets. 

I think the biggest hurdle is the pure lack in quantity of multifamily homes in the area but downtown and the beaches have tons of opportunity for homes to be rehabbed.

We anticipate moving out of the area and our units would be self sufficient. 

Since it's ferry-only, you want it to be self-sufficient and may want to offer more amenities than a regular bnb (like stocked pantry, etc..) and you may crush there.

This translated into a full-gut of the entire house with an estimate of just under $40,000.00 for the abatement.The Vendor, an estate, was unwilling to do the work (expected) but were equally unwilling to reduce the price sufficiently for us to underwrite the risk.

However, ensure that all partners have sufficient capital for upfront costs, conduct thorough market research, and have expertise or hire professionals for the flipping process.

And only if you have access to sufficient details to be able to step in and run it.  

Since your contract obligates the seller to produce records and information and permits access for inspections (or at least it should) then there should be sufficient time within which to do these things plus a little extra time to say "no thanks" and get your deposit back.

However if you plan on buying 3-4units, there is a trigger rule for FHA, it is called the self sufficiency test.

Either as long you are living there you can still rent other units out however, if you are looing for triplex-fourplex then you would need to past the SS test (Self-sufficient test).