Qualification for a Portfolio loan would be based on how cash-flowing the property is, so make sure to have a solid idea of gross rents received, along with the expenses for the property (including taxes and insurance, maintenance, landscaping, any landlord-paid utilities, etc.). 

Here's a summary of the economics.They purchased the property for $280,000 in 2004.The loan balance is about $178k.Monthly principal and interest payment is about $1,265 with $709 currently going to interestProperty taxes are $4,116 annually and insurance is $1,000.Currently the house is vacant for the sale so there's no rental income.Therefore, the monthly burn is -$1,135 (ouch).For the sale:Property was originally listed at $335k and they received 0 offers at that price. 

What type of insurance should I buy under this condition?

The insurance company is going to rebuild all the units due to the amount of damage, but there has been some hold ups with the county due to permitting, changes in codes and such that has delayed the rebuild process greatly.

I am still learning the ropes of real estate investing, currently i have PM that manage all of my rentals, but i have been looking at trying out self managing recently after listening to some podcast and readings. One...

You can deduct prepaid interest, insurance.

I did not think you did either but I am pretty sure you do.and in Oregon you don't need a real estate license but if your buying a property to resell IE your not owner occupy you for SURE need a developers license.. and to get one is simply a fee and you need a bond and insurance.. so we cannot make a blanket statement that its legal In all 50 states.. to buy then resell.. 

The plan sounds like it's frozen.In-service payouts may also not be allowed, possibly with hardship being the only exception.The plan document will explain these things.

My costs go up every year in taxes, insurance, costs of repair, HOA dues, etc.. if you choose to, then definitely include something in return.  

Mine didn't see me needing the protection of an LLC until I grew larger but advised liability insurance.