Make sure your insurance will cover you in this aspect, some carriers do not (they'll cover everything else, just not the pool).

The company I am going through for the General Inspection will not provide that aspect, and I know that there is an issue.   

As others have mentioned: in your situation it sounds like you should be working with a commercial bank.There are times, if all the other aspects of the deal make sense, you can use a hybrid of a historical and proforma P&L if there are <12 months rental information.

What has been everyone's experience with finding someone who handles the construction end, while they focus on other aspects of the business?

We do have a lawyer lined up who should be able to take care of that aspect, so that's good to know.In terms of the structure you proposed, I just have a couple follow up questions to make sure I understand properly:1) If the investor pays us $50,000, we would offer to pay him a preferred return of $3,000 per year from the monthly income we receive?

Once I fully understand the financial aspects of REI I think it’ll be easier for me to make a decision

In the very least, you will want to do all the bullet points you mentioned and try to keep all aspects of the business in the name of the business and separate from your personal business. 

(Obviously, if you add leverage, you are increasing your risk and they didn't study that aspect.)

So here’s another aspect that’s concerning.

It must be your primary residence but their is no rule saying you can not sleep over at your significant other place occasionally.Every aspect of investing has a measurement of risk ;)