Or do I just need to make sure that the contract is worded properly and protects my interests?

The tenants are responsible for reporting issues to you so you have an opportunity to take care of the problem, improve their living situation, and protect your investment. 

Is an umbrella policy going to offer us adequate protection? 

The downside is you will need to live there, for a minimum of one year (to satisfy FHA Requirements); AND because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC.

It provides additional protections because you will have other people living on the premises.

The mold is only on the ceiling, so seems as though the walls were well protected with appropriate anti-mold seals.

Liability protection?

I am constantly telling investors to protect their income (properties) so they don’t get stuck in scenarios like this.

It's gotta make sense and you need to protect your investment.

To answer your question - yes, you will need an attorney who will represent you in this and make sure that you have the right language and protection in the docs but he will not tell you if it’s a “good deal” or not.