Our no-smoking policy covers the whole premises, not only the inside.

Check these for inspirations: https://www.pinterest.com/explore/painted-stairs/Or you can use some rubber treads to cover old/ugly sub treads, and still paint risers white. 

Or would it be best to get a conventional loan and charge regular rent to cover the mortgage?  

(You do have reserves to cover this sort of situation, don't you?)

I'm curious because 1700 covers at least one no th rent. can I argue that this 1700 is for the court fees and month of December December's rent and still procede with the eviction process?

Its covers a HUGE area and several counties.

Would a lease option saying I just cover the property taxes and property improvements for him work?

Fortunately, you have the security deposit if it comes to that point to help cover some of the costs. 

My question falls on insurance for the Dwelling - should this cover the entire appraised value of the house?  

@Tyler Crawfod, our BP colleagues have pretty much covered most if not all ways to make a situation work.