We plan to later add another dwelling in the rear of the property.

Stay away from the smaller dwellings. 

New Tennant and adding instant equity.

If it is not owner occupied, then you need a Dwelling/Fire policy. 

(there are more, I intentionally left out the rest, which are mostly related to sales)However it also states:(a)  Subdivision (b) of Section 10131 does not apply to (1) the manager of a hotel, motel, auto and trailer park, to the resident manager of an apartment building, apartment complex, or court, or to the employees of that manager, or (2) any person or entity, including a person employed by a real estate broker, who, on behalf of another or others, solicits or arranges, or accepts reservations or money, or both, for transient occupancies described in paragraphs (1) and (2) of subdivision (b) of Section 1940 of the Civil Code , in a dwelling unit in a common interest development, as defined in Section 4100 of the Civil Code , in a dwelling unit in an apartment building or complex, or in a single-family home, or (3) any person other than the resident manager or employees of that manager, performing the following functions, who is the employee of the property management firm retained to manage a residential apartment building or complex or court and who is performing under the supervision and control of a broker of record who is an employee of that property management firm or a salesperson licensed to the broker who meets certain minimum requirements as specified in a regulation issued by the commissioner:(A) Showing rental units and common areas to prospective tenants.

He built in an INSTANT $110k of equity there.

You'll need a landlord policy (sometimes called a dwelling fire policy). 

We have an LLC and have a commercial liability policy with fire and dwelling, as well as the umbrella policy that extends liability limits beyond the original policy.

Please consult an attorney for legal services andadvice when necessary.APPLICABILITYThe Security Deposit Law applies to all rental premises or units used for dwelling purposesexcept owner-occupied premises with not more than two rental units.

I decided at that moment to forfeit the $1,500 I had already spent on this contract, which saved me $48,500 instantly, not to mention the problems I potentially avoided.