A contract can be made on the back of a napkin if both people agree, but you'll want safeguards in place to protect your earnest money and liability so a state form, realtor form, or custom contract would be better.

2) Given the root causes of the great recession, many regulations and safeguards were put into place in hopes of lowering the likelihood of such a crash happening again. 

I believe there are more options and safe guards in place when dealing with military renters.

My question, is there anything i can do to safeguard myself from any future legal disputes with this crazy tenant?

And I'm not sure what sort of legal safeguards there are as an investor / mortgagor when the borrower still holds title and could potentially run up other debt against the asset.

How to identify your biases and safeguard

Making sure you have the appropriate documentation for the appropriate kind of loan with the appropriate lending terms is the easiest way to safeguard you money (besides not lending too much money on a project). 

Is there any strategy to do such a transaction, proceeds of rental sale, to buy undeveloped land with intent on building an Airbnb small cabin, that would safeguard our net? 

While I do have good relationships with all my sellers, I safeguard myself by depositing my payments directly in their bank accounts.

How successful you might be has alot to do with your knowledge in establishing trust with a seller, if they see you as the solution to a problem Michael's approach can work (not knowing his approach, but from his comment) and personality, professionalism and your track record will have a bearing on making a deal successful with any sub-2.In most deals, you'll be putting money down, if you're less motivated sellers, the normal deals, and putting in safeguards discussed here on BP can help swing a seller to your thinking.