Has anyone dealt with this type of issue that can give me guidance that will legally protect me?

As long as you can draw a line of the "reasonable use" of the structure for the disability (this includes CARETAKERS, so now the caretaker could be living in the shed), then you are federally protected by this law, and the federal government will come to your aid if the city "abuses" or "discriminates" against you. 

This is important because you need protection against tenants that do not pay rent.

What are the best practices and methods to protect yourself as a landlord?

Trusts and LLCs owning property must be protected for other risks beyond the usual property and liability risks associated with home ownership.

Many OOS investing require a boots-on-the-ground team in order to keep their projects protected both fiscally and physically.

Hers is to protect herself.

The property is owned by a LLC but I want to confirm that I am protected.

There is a time to be firm, and a time to protect your assETS.

With this strategy, you are getting some degree of cash flow day one, which can protect your principal in the event of some downturn in the market.