However, if you take a loss, deducting that against other income helps soften the blow.

We ended up with foundation issues, disintegrated cast iron, aluminum wiring that needed to be replaced with copper wiring, blowing insulation into the attic, sheetrock repair.

Do you have any suggestions/advice on what I should look for in the policy to ensure I'm protected generally protected against a hurricane coming in and blowing the house away, or a guest hurting themselves on the property and filing lawsuits? 

Its on a hill, without any big trees to maintain or blow down.

The Oakland rental blows that number out of the water. 

that kind of thing.. my experience with low value real estate sandwhich deals is they end up being a lot of work for tiny money.. and blow up often..  

A big hit like that can really put you back if you can't take the blow. 

playing devils advocate heregreat purchase price. 

I am not advocating for this type of lending, nor do I have too much info on them (as a long time hard money/private money broker myself I steer clear of anything owner occupied), but yes they certainly exist.

I also recommend you have the departing tenant sign if it's not too late.Example:"On March 15th, Joe Blow vacated the rental and was removed from this lease.