Otherwise it feels a little sketchy to me, and I would not risk having to evict them after only three months payment.

My current W-2 income will probably not be enough to qualify for the loan, but my income from my current property, which has existed for far less than the two years lenders will look for, gives me more than enough money to be able to handle the payments on such a loan, if I could qualify. 

Then go down to Lowe’s and get them to cut the price by 10 percent.

What is the best way to go about pulling from the $100k in equity in the first property for a down payment on the next property?

Remember that principal payment is not a cost, but you eventually include depreciation.

It appears to cut into the usable space quite a bit, however there should be enough for building a structure.  

Would there be budget cuts on services ? 

They don't have any money for the down payment and want to find a property for "$0 down, creatively financed" but at the same time they'll pay $10k for a lying guru to blow smoke up their ***. 

My point, however inartfully stated, was the underlying payment obligation needs to exist to put others on notice. 

In order to not have to put any of our own money into this deal, we intend to leverage the equity of my Grandma's home as a down payment for the loan.2) Should we leverage a construction loan or some other form of financing?