What level should I start at?

Typical terms: Lenders might get 10% to 30% equity, depending on how much capital they provide and the project’s risk level.

All bedrooms are on the 2nd level and there is a big open loft area with windows on 2nd level that's not used much now.

I'm in a similar situation where my split level basement has it's own exterior entrance and and glass sliding door. 1bed1b, kithen and laundry room. 

All short-term rentals have some level of weather risks, I would say.

These two should easily provide the level of coverage you need to protect the assets you have including your personal property equity.  

At a technical level you have two paths, either 1) combining the bottom and ground floor units into a larger unit as you suggested above or 2) create a third legal unit.

Happy to share if you're interested.Accounting systems are great: QB, Stessa, Digb but the reality is you want to track a few things at a high level, this will make your life a lot easier when you sell/need to report income/loss, and accounting systems won't always make this easy. 

There has been a considerable amount of foundation work done (addition for piers, leveling, etc).

If this guy is an attorney he should be smart enough to know that top level apartments get hot in the summer.