I offer 10% interest only payments for a 6 month to year loan term, at the end of the loan I pay the principle back and give him an additional 5 % of his principle.

I do have huge respect for the ethical contractors who work hard and take it through. 

Maybe I am overthinking this but was trying to think in terms of the principles of consolidations and was curious what everyone's experience has been and the flow of funds to legal entities. 

USDA requires you to use this as your principle residence for a year but unlike FHA no one comes to check.  

@Kevin Dehesa The principles will be the same for finding cash flow.

-The way I would see that working would be to pay 8-10% interest only for the 3-4 months that we borrow the money, then pay back the principle in full once the house is sold.

The principle will have reduced $3,000.Has anyone out there invested in these types of mortgages?

Moderation in all things of course but the 1031 does allow you to capitalize on both of the above financial principles to your advantage.

Do you or anyone know of an agent who actually responds, is investor friendly and/or has experience with investors and has good morals and work ethic?

This was proven to me in an ethics poll about returning an envelope full of money.