You have plenty of red flags and obviously see them.

Actually, your risk is cut by more than half because your partner knows what they are doing and will help you avoid red flags and bad deals.

While the bank has no issue loaning me more money than I could ever afford, there seems to be a lot of red tape around selling our current home, the builder plans being approved, 20% money down, and other bank requirements I probably have not encountered yet.   

You guessed it...your pocket, and you are now substantially in the red...as in losing "your" money.Calculating a return on your investment using "%'s", and "feel good" risk controls, is an illusion...and this property is a terrible investment.

Are there any red flags, warnings, tips etc that anyone has for me in doing the financing? 

@Tyson Fugett there are a huge number of red flags in your situation.

Amy Pfingsten of Red Door Realty.

Applying for multiple loans at the same time can be a red flag. - You mention $250K equity in your primary.

The deal seems too good to be true, which always throws up a red flag. 

Basically, we need a banker but prefer less red tape than our local banks.