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. 

Hey Gino, I was in your shoes about 3 years ago.

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.

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

good idea - we will do so and see if anything comes up that we didn't discuss during our build.back in the day when the tests were done, nothing was apparent from the engineers or tests themselves that indicated we couldn't build. i'm not sure what anybody else would find (if anything).we are suspecting that most buyers thus far may think "wow, this sh*t just got real" when they see the reports and have a minor panic attack and back out. i'm trying see how i'd feel in their shoes. it's surprising how many folks do not research the ins and outs of the home building process before making an offer...

Assuming current interest rates my debt service would be around $87k/year (30 year, 7%)  which I am comfortable with.