I wanted to share my thoughts on why I firmly believe that investing in single-family homes with an Accessory Dwelling Unit (ADU) offers a better investment opportunity in the thriving St.

In terms of your grandfather living there as long as he's not the owner having a dwelling fire/rental property insurance policy is appropriate.As @Greg Scott pointed out he should have a renters insurance policy whether or not he's actually paying rent.In terms of liability coverage, that depends on what you have to protect so there's no one-size fits all approach.

It falls apart completely if you think of yourself as as tenant and pay yourself rent (that you would otherwise be paying someone else).https://www.richdad.com/your-house-is-not-an-assetI prefer the quote from The Richest Man in Babylon, "Make of thy dwelling a profitable investment." 

Copy of Dwelling Insurance Statement2.)

I know it’s best to get out there and do it instead of dwelling on it but that is what’s holding me back. 

We wanted to run plumbing to the back so that we could make a livable dwelling and rent it out.

If you are in too low lying of an area, it may not be the wisest long-term play (unless we start building dwellings under water!)

I'm not grossly opposed to SFH if it is much cheaper, but do to the spacing between dwellings per city code I could fit more doors on this plot if building duplex.

It would be surprising the think the intent of the code was for this to only apply to two-family dwellings.  

Our local statute specifically says: "the tenant shall not be considered to be absent from the dwelling unit without notice to the landlord during any period for which the landlord has received payment of rent."