New Mexico governmental policies are historically unfriendly to businesses in general.  

There are exceptions, but not many.My policies are explained to landlords when they hire us.

Their policy changes including price increases, charging for every little thing as an "add-on", complicated GUI and the lack of fixes of known problems (posted by their "community" on a Facebook Group), and super slow ACH deposits (which take 10+ days!)

This means their insurance policy will cover you on any claims made by the tenant.

Many landlords disagree with this policy but that is because they fear having to protect their investment.You have a lot of money tied up in your investment, always put yur needs first and reject any applicant that may place you at risk.

My policy is similar to @Bruce Woodruff.

Can't you get your builder's risk policy from the same agent you currently carry your general liability (for your GC business) with? 

When you talk about liability you can offset that by making sure you have a good Insurance policy and close the loan in an LLC.LLC protects you and your assets from lawsuits and any litigation from any and all accidents/injuries.

Each municipality is different but you should be verifying the steps needed to get the this parcel shovel ready and consider that an insurance policy. 

This sounds like a pre-existing defect so you will have to review your insurance policy but I am guessing there will be an exclusion.