I suppose it’s because of all the mortgage fraud and etc going on in the last decade... they are taking every precaution as possible...

Make sure to follow all the precautions you would for a long term renter.

It is only a precaution in case there is a leak so the house doesn't flood.Other than that, you may be responsible for snow removal or other typical lease items through the last day of the month.

Unlikely they would be comfortable underwriting your policy if they knew you’d be renting that floor out without two means of egress.I would recommend consulting with your insurance agent before utilizing that space, and taking whatever precautions he/she recommends.

The main thing is to be proactive and transparent- hire an exterminator to come and secure the property from any intrusions and set traps as a precaution (be proactive - rats and mice will always find a way in if there is one).Try to get an idea of when construction will end or at least when the demo phase will end.

But a true hard money lender isn't interested in owning properties and takes every precaution necessary to make sure they're not stuck with one. 

(side note 2, just as a precaution.

And what other precautions do I take? 

Thankfully, they took precaution and made arrangements to move.  

I have found that many of my investors have been having issues with fraudulent private money lenders down here in Florida.With that being said, I was wondering what types of precautions can be taken when dealing with a private money lender.