To answer all your questions:Yes, it is zoned properly.

Rather than fishing for ideas for your particular situation on the public forum (some of the feedback you'll get will be wrong), you should get one on one with knowledgeable tax expert who can analyze your situation and provide you with proper guidance. 

If you gave proper notice, in accordance with that lease, you're fine there.You, by your admission, stated you paid rent late every month.

We've had some of our homeowners use Proper ins which I think is overpriced but an easy solution. 

Check the state laws and see the proper procedure.

Last tax season I am almost certain my taxes weren't done properly in regards to my rental property (ie. expenses for renovations weren't factored in, I paid my taxes well into 2019 due to issue with getting the bill so they weren't factored in).

You are considered "disqualified person" to your 401k and assigning this contract to your 401k would be considered "prohibited transaction":https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-prohibited-transactions The proper steps would be:1) Establish and fund self-directed 401k2) Find and purchase investment

. :)Note: as a licensed agent - ensure that you're disclosing everything properly to be compliant.

Typically those that tell you how bad a HELOC or HM is don't know how to use either properly.

Either one can be fine to work with if the deal is structured properly, however, you have a better economical exchange using the professional.