Should I include security deposits I've received and then forward to my owners in the 1099 I issue them? 

Of course, there are potential issues like alligators, higher flood insurance premium, erosion.

The main issue is that rental rates on the new construction make it challenging to cash flow much, if any, in the first 3 years. 

I personally prefer to negotiate time to get all of my permitting completed, but at minimum I want to check the items I noted above.

I rehabbed a home and was caught without building permit I went through the process of getting a permit but my original plan needed a variance after the process and being denied the variance at the board meeting I decided to change the plans to build the structure in the same footprint and received two building permits.

I would hate to see you get it and they move out the following month because they are on a month to month lease thus removing your income stream right out of the gate.I would get an inspection on the property to make sure there is not a hidden issue of Black mold or asbestosis and such problems as maybe a leaky roof.

Bikes from a bike shop will be more expensive but they will be assembled correctly and will have fewer issues.  

I've had many discussions about this same issue.

The expectations are they pay on time and treat my unit right and their expectations of me are I address issues in a timely manner, give them a great place to live and treat them with respect.

Most of the family and friends are willing to invest with us as we give them a steady return %...do you see any issues with that ?