They took a lot of risks that I wouldn't do, like liquidating much of their savings to buy property or used a lot more leverage than I would be comfortable with.

If no construction lender can get comfortable with you as the builder (aka principal, sponsor) regardless of you hiring a well-qualified GC, then maybe the solution is to give some piece of the equity to another builder/principal who would oversee the GC, and whom has the track record to satisfy the lender.

It is important to be comfortable with "worst case scenarios" whenever you are investing - period. 

DSCR 1 ratio will get you best terms depending on your credit and LTV for many lenders who specialize in DSCR loan products which in many cases isn't banks or credit unions as they don't feel as comfortable with the products as conventional loan products. 

Do not squeeze it into a space that you think is too hard to navigate comfortably but I think you have the appropriate size here. $40k also sounds very inexpensive and likely unpermitted so just be on the lookout for drive-by inspectors and make sure your contractors have proper workers comp. 

Yes, I want to make good investments and make money, but I also have a strong altruistic drive in providing safe, comfortable housing for women (and their children) in need. 

I want to do whatever will make this particular homeowner comfortable. 

The problem is I want to have a comfortable lifestyle and to travel.

What I did was buy a single family home in the worst neighborhood you would feel comfortable moving your wife and kids to within 15 minutes of your home.

I can comfortably put 10% down with at least another 10% in reserves for any updates or furnishings.