Or is it a situation that the company insuring the property has not obtained appropriate licenses to operate in Ohio, therefore I won’t be covered in case of a disaster?  

The best way to think about it is you're in the business of renting a property-that business isn't operational until it's ready and available for rent (aka in service). 

In Pittsburgh, where I live and operate, this would be a two to three-month process in front of almost all out local district magistrates.

If they were part time and weren't up to date on training, most probably go away. 

Most lenders will vary how aggressive they will get based on the experience of the operator (you), but I don't know any that will lender to someone who's never done a spec build like you're contemplating.

I disagree--there are more tough times ahead, but as stated above there is light at the end of the tunnel and this time it's not a train. 

I operate 14 properties from the same checking account.

Supplement this far simpler entity approach by ensuring you have appropriate types and levels of insurance, you operate your business in a manner in which your conduct is not considered an exclusion in your policy, you work with licensed and insured vendors, you execute contracts with indemnification clauses with these same vendors/ require additional insured status &  maintain appropriate licensing and permits.

From my understanding, as long as you intend on doing a STR when you close, there are no rules against changing your strategy after closing, especially if you find that something else is more profitable.So in our case, the lender determined an STR would bring in ~$3500/month (with all of their conservative factors), but now that we operate it as a huge 3300 sqft Co-Living property, it actually brings in $7000/month.

If operating costs increase, then customers/tenants will eat the costs in tight markets.