You need to have a good understanding of how it all works and the risks involved in the different types of lending, borrowing, and investing.The student loan debt is actually my wife's.

I previously worked in risk analytics at a large hard money lender and 3 of the most important things are:1) Experience.

I am too old for that risk.

A legit assistance animal is not a pet, it is an assistive  like a wheelchair in the eyes of Fair housing, Each state does have the right to limited regulation in this area, in WI we can now require documentation form a WI licensed professional, where previously an online Quack could sign off, there are also situations where you can deny, if the animal could cause a problem or pose a health risk for other tenants. be careful on this one and know the law. seek advice from a licensed professional. 

In short, I think its a low risk decent idea. 

Yes, you certainly need insurance, usually a Builders Risk policy.

And second I think you need to really characterize your risk/return for both approaches you've outlined and see how that fits your personal appetite for risk.

Without renter's insurance you’re putting yourself, your rental, and your savings at risk.

Now if the second holder wishes to pay the taxes because he is in the greatest risk you are still safe at first.

If you don't know what you're doing with construction, it isn't worth the risk IMO.