Most lenders are going to be limited to 70% of ARV ($560,000 total loan amount) but that means they could fund 85% or a bit higher of purchase price + rehab ($560,000/$645,000 = 86.8%), which is solid.

Quote from @Burke Atkerson: With over a decade of real estate investing experience and over 100 flips, I now provide private money & hard money loans.

They’re requesting what feels like an unreasonable amount of information, and the demands keep escalating.So far, they’ve asked for:A video tour of my home officeCredit checks on me and my partnerCopies of the deeds for every property we ownA copy of my partner’s home lease and utility billsBusiness phone billsA signed letter from the bank verifying our accountsBank statementsHonestly, it feels more like qualifying for a loan than trying to become a customer.

Then once the 1031 is done if “legal” take a loan out an buy your new primary house.  6.  

I doubt he'll be able to quality for a loan (VA) with just his income. 

You can get a normal owner occupied home loan to do this. 

If I got a home equity loan for Property 1 and used the proceeds as downpayment for Property 2 and then got a 2nd loan for the remaining 75% purchase price for Property 2, when I sell Property 2, can I use the Property 1 loan as part of the cost basis for computing Property 2 capital gains?

If that's what you're really after I would start with the basics of what kind of bank loans either residential or commercial are available to you - not saying this is the best option, but it's a good place to start.

There may be requirements to cover the trash service depending on the town.My first commercial loan was 30% down, 20 year term (adjusting after the first 5 years). 

If you are using a loan, well there is simply no inventory in Cleveland.