Any way you can make extra income to throw at the 40K CC before selling? 

Then she still only makes 2% extra for taking the risk of you not paying versus a bank.

I can certainly tell you in SoCal if you had a single family home with an ADU that generates an extra $2k per month in income, end-user buyers will not be thinking "I'd pay an extra $20k for that." 

Where to spend the extra for durability and sometimes having to sacrifice aesthetics for durability, etc.

I don't personally have an umbrella policy but if you do want to be extra safe, yes, I would recommend an LLC and umbrella policy together. 

I'm extra cautious when analyzing a deal like this, but a lot of them end up being great.For interest-only financing, negotiating some principal paydown is a good idea.

You either have to earn extra money via sweat equity (working as your own PM or do the renovation work), or you have to be ok with a negative cash flow.  

I just had to take extra money out of my personal account and funnel into my rental account. 

The only question is if the increased risk of loss is worth the extra return. 

Not your debts or your income or your DTI or your reserves or the extra guidelines and underwriting and overlays that that a residential mortgage company can have Do you require a personal guarantee?