So you qualify for both $500K tax free. 

Not true, but don't believe me or anyone else, go find the answer from qualified tax professionals!

This way, both of you would own the properties together in the same entity, making it easier to qualify for a 1031 exchange when selling and reinvesting.2.

I recently learned that if you owner occupy a residence for part of the 5 previous years before sale, and you rent it for the remaining time, you can calculate the percentage of time the property was owner-occupied (and thus qualifies for the sec. 121 primary sales tax exemption of up to $250k for single filers) vs the time it was being rented (which qualifies for 1031 exchange) and claim both benefits. https://hcsequity.com/blog/combining-1031-exchange-with-121-....How does this work for a multi-family?

Find out how much you can qualify for and if it's enough.

Hindsight is 20/20 of course but this is advise borrowers to go the conventional route (assuming they can qualify of course) because it is a cheaper loan then FHA with the MIP for life. https://www.bankrate.com/mortgages/remove-fha-mortgage-insur... 

That will prevent them from qualifying for other rentals, a personal loan, or a home loan.I have sent nearly 60 tenants to collections.

A qualified professional appraiser will generate a comprehensive analysis considering factors such as sales comparisons, highest and best use, market conditions, and income generated following Uniform Standards of Professional Appraisal Practice guidelines.

Néstor Orlando Pimentel SolorioYou do not need an LLC with history, nor experience, to qualify for a hard money loan.

Begin reaching out to lenders to see if you can qualify for a conventional mortgage, especially considering your change in financial situation (living in Phoenix, out of cash)