It sounds like you are suggesting I could pull out a small er amount of equity and still make the purchase but wouldn't I end up with three mortgages: 1) my primary mortgage loan, 2) and equity loan/line and, 3) a separate mortgage for the balance of the condo?

It is best to have separate utilities (but not necessity).

I was told a new roof was put on in the last 5 years and all utilities are separate.

If I’m looking to make money off this and lower my tax burden, should I start a separate company that owns the property, pays the team (contractors, accountant, etc.), and manages the tenants?

This also keeps risk from one deal separated from risks of another deal (whether slip and fall lawsuit risk or investment performance risk).  

@Tina Opel - just from the lending perspective I would make sure you have separate accounts set up to pay rent and things like that.

We have not yet decided on whether or not he will separate.

Lastly if we would be forced to lose the equity by taking the loan on the ARV, what's a good alternative option for financing the rehab separately from purchasing the house?

I plan to post later (separate post) on the overall housing stock, which has aged because of low building volumes in many counties.

Each of these are separate municipalities despite all being within ~15 miles of each other and have their own (tiny) population figures that would skew the OP's basic formula.