For instance, depending on your location insurance costs could be much much higher than indicated in the book, construction costs are a lot higher, etc. 

A phase 2 may be required depending on the outcome of the phase 1.  

It will all depend what you feel comfortable in terms of budgeting and the type of repairs needed.

Today we are economically diverse and showing job growth in several sectors.Having said that, I am not an economist (or a fortune teller) so these are just my thoughts after having gone through the Great Recession and knowing how housing-dependent we were then.Melanie

Is there strong demand for rentals and is it potentially possible to rent a room for 1500-2000 depending on the location (slightly cheaper than a studio from what I've been seeing which is how I priced my rooms in AZ)?

All depends on the interest rate on the primary home and if fixed.

If the title company requires that you become the Manager of the spoke LLC, you would have to amend the Operating Agreement, and, possibly, you will have to amend the Manager of the LLC with the Secretary of State (depending on the State).

As far as how much you pull out it depends on terms.

My bookkeeping practice pays me active income, so my priority is equity.For debt loans, you will see 10-15% annualized, depending on your experience as an operator.

As @Carl Millsap said it depends on how much more in rent you're getting compared to the costs of renovating.