Can I then use that for the downpayment/collateral for the construction of the structure? 

Living with shared spaces having people who seem to get along should help mitigate drama and potential collateral damage caused from drama

Get's you the same result perfectly legal.Your second idea is also not quite legal, because the act of transferring an asset, that is used as collateral on a loan into an LLC and potentially out of reach for the bank will most likly be a breach of contract and trigger the due on sale clause.

I just walked in with a list of homes to offer as collateral and the bank was very receptive.

These are called portfolio loans, and many portfolio lenders will provide financing without significant income, if the borrowers can show decent cash reserves, have good cash flow from the properties and/or can use other real estate to collateralize the loan.As for whether it's better to leverage or pay cash, everyone has their opinion, but other people's opinions shouldn't matter.

I suggest you run away not walk.Secod time you have asked about analysis on this deal, if you have to ask how to evaluate it, it probably isn't something you should get involved with.Now, that said, if this is something like a finance class problem lets state some parameters, exit strategies, time to construct and place in service, industry served, general location as to population, economic base, % of the deal, collateral security involved and market expectations.

I have very little capital or collateral right now, so its difficult to get in, but I have the determination and motivation to get there!

Oh, you have collateral? 

. :-) Nope, the roots of the 2008 housing collapse are widely blamed on the loosening of collateral requirements for the Big 5. 

The 20% down payment is basically collateralized into the loan.