Once a tenant is approved, when is it appropriate to verify that they have purchased renters insurance.....at the lease signing or prior? 

A city inspector did an inspection of the unit in 2015 and sent me a letter stating the rental property is in compliance with the City Residential Rental Inspection Program.

@Damian Sandoval Fast close option can be achieved by getting HSA approval.

I have saved up and have enough to live on for a year without any added income and I have been successful in getting pre-approved by several hard money lenders. 

Arturo Fuentes you could look at the FHA program for 3.5% down if you plan to owner occupy.

So I was able to do a cash for keys program with my tenant and get them to move out early.

See what loan programs you qualify for and then let those terms inform the financials for your rental.

@Stephen R.Sorry if I was confusing, what I’m trying to suggest is take it all down cash and then put tax 4% credits back on the property, keeping it affordable and in the program.  

Local Planning commissions in these hillside neighborhoods are notoriously difficult and lengthy to approve plans.

Also a concern here is the addition being an approved/permitted spaceSection 8 not withstanding if the addition wasn't a permitted addition you'll likely will be taking a significant risk that should a tragic event take place there with a loss of life or serious injury you'll have no place to hide as most insurance companies will not pay your claims plus the civil and criminal penalties are severe!