It depends on what your interest rates are.

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

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).

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

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. 

As noted in articles Michael noted, this may or may not have any real impact on your taxes, depending on if you have any other passive gains/income to offset.  

The exact amount of rent on Jan 1 will depend on whether your notice of the increase was handled according to the lease or not, but you may not want to risk providing her with angles to fight you in court just over a few dollars.

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)?

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

Also depends if you are getting appraisal and what attorney charges for creating loan docs