@Jared W Smith wouldn't the LNO (if I can obtain before closing) be sufficient for me to use it as a LEGAL 2 fam?

If so, you're probably good without doing additional work, as the exterior sealant and drain would be more than sufficient, barring something extreme...

But if you’re going to lose sleep over it, then I would say you probably need to save a bit more until you have the cash for reserves.

Also, if not possible because she's not at that age, then look into maybe her selling you the home as a non-arm's length purchase - she can gift some of the equity if there is equity as your down payment, and look to a lender that can do business bank statement qualifying, if you are not able to show the income on your tax returns but can verify sufficient business deposits into your bank account(s).  

This will sleep 20 guests and should be a six figure gross airbnb.

Cool, but there is a cost to that too since the assets are a necessary, but not sufficient condition to running a STR business. 

One provides the chance at a life of abundance far earlier, the other may let you sleep well at night. - What do you believe is the better long-term investment? 

Your basic insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits.5.

A higher fixed rate should be sufficient. 

Other than real estate, what are you guys buying or doing that is making you extra money in your sleep.