Worst case scenario a large amount of savings and a good work history might get you in the door (also assuming the rest of their screening comes back good) rent for a bit, then get mortgage for home.

SFH's of that size in the area were more like $500.

Check the application against all of your other screening criteria before entering the murky waters of a service animal. 

Make sure you can add value to it, don't overspend, cash flow positive each month, look to purchase in a good/up and coming location and screen your tenants really well.  

You make your money during the screening process.

How do you know the accurate costs associated with a build this size?

I would just politely tell him that you screen very diligently and tell him what your criteria are and that you have just as much interest in getting a good tenant as he does in getting a good neighbor.

Nuisance things: paint, wallpaper (very annoying), holes in drywall, smells (unless it is a sign of mold), cracked windows, missing or damaged screens, no GCFI, flooring, broken handles, damaged cabinets, interior doors on exterior entrances (I see this a lot), bowls under sinks to catch leaks, general run-down-unlovedness.

I think you can do that for up to the size of a 4 plex.

You are making it as difficult and expensive as possible for anyone to sue you, and most attorneys will look at a well established asset protection plan and drop the case because (A) it takes time and money to discover what is there and (B) there is a lot of uncertainty if they get a payout, or what size that payout might be.