The second phase will introduce modest restrictions, with continued data analysis to inform further regulatory measures.

Or is it restricted entirely to ingress/egress, i.e., I add 150 square feet and put in an exterior door, but I can't use the 150 square feet for kitchenette, laundry, etc.?

We don't have rent control, there are no restrictions when you renew a lease.

Your debt will restrict how much you can borrow. 

And, I don't know TX law, so I'm not sure if there would be any difference as to the specific rules that may be different in TX, but, it's an old law from merry old England that made it's way to the US, so odds are there is some version that would apply to you in TX. 

My realtor is reaching out to the listing agent but told me the seller may have restrictions (unclear what the restrictions are) on changing the contract now since they are doing a 1031 exchange.

This is an odd thing to have to argue with a real estate investor.

assuming they would not restrict your use of the property for investment purposes I have to wonder if this would be an efficient way of partnering in the beginning of your investment career?

The linked "fact sheet" is, well, oddly light on facts. 

@Ryan Randall  talk to the fire marshall and get a copy from them of any local restrictions.