Finding a C/C+ class, 2% deal, ended years ago unless you're buying and holding in dangerous areas.

The mitigation alone could have bankrupt him if he bought it without knowing. 

To your point they are high, and could be mitigated by doing due diligence and finding a place in good shape, but I felt like these were nice ceiling numbers.

)The key is to stay out of the red danger zone - you never want to be in the intersection of the matrix where something is "almost certain to happen" and the consequences are " Catastrophic"The great thing about using a matrix to solve risk problems is that you can add incremental mitigating factors to lower frequency and or severity and move your target into the area of the matrix where risk is tolerable.Risk tolerance varies.

For the no part of my answer- The mere fact that you are asking this question in this forum tells me that you're looking for a solution to mitigate the risk.

Could this be mitigated by the investors creating a corporation, depending on their tax bracket?

That can be good for diversification and risk mitigation, but bad for returns.  

We also have 3 young kids to think about, so we're all about mitigating risk as much as possible. 

While the smoke damage can be a simple fix, it can also require pulling insulation, doing mitigation, and replacing drywall (and unfortunately it's tough to tell until the remediation starts) even in rooms that were not impacted by the fire. 

We use to have an in house protection plan, however to mitigate risk from the tenant aspect in the event something were to occur such as i.e. fire, we wouldn't be left holding the bag.As for the facility itself, I would have to research that as it is above my pay grade.