If after all expenses it cashflows then yea that would be the best option for you'll be able to sell the land, if it doesn't then hookups might be a better option (With the big assumption that there is demand for that in that area) 

Rent would be ~1,400 to 1,800 / month which is above market rate but housing is in very high demand and price is in line with what seniors who live on their own would be willing to pay based on my conversations with local Real Estate Agents. 

If I were starting out now, I’d focus on markets that balance affordability with solid rental demand, both for short-term and long-term rentals.

Land is very tough to estimate value do to it's valie is based on what you can do with it and how much demand there is for what ever is ultimately done with it. 

But we're also finding a high demand for 1 bedroom relatively inexpensive stays like studio apartments. 

The tenant is responsible for the animals and what they bring in, not you. 

Quote from @Jamie Bateman: @Chris Seveney well, I don't want to increase the demand for the next trade, but with the HECM NPLs you get interior photos prior to bidding.

Start by analyzing market trends and targeting neighborhoods with strong rental demand.

There are so many rentals in the area, probably on shared wells, so those people have either decided the STR use is okay or they are comfortable risking it.My intuition is that any actual disagreement over water usage could be handled with the other owner; but the risk would be if the other owner just doesn't like the STR and wants to use the well agreement as a reason to demand it be shut down.Any advice would be greatly appreciated!

@Lolo DruffWhen investing in properties, I aim to balance high cash flow with appreciation potential in affordable, stable markets with strong rental demand.