Here’s a bit about his profile and what he’s looking to achieve:- Alex is 30 years old and works as a software engineer in San Francisco, earning $167,000 annually.

This is the Checkbook control style LLC. 

BTR is good for long term rentals but for construction economies of scale it's pretty bad. they need to be on the higher density side of built to rent communities greater than 10 units per acre in townhome styles without garages in my opinion. it's a slow model and the entitlements take forever, BTR communities are suburban mostly which have lower rents and thus lower values.

If the price to replace is within budget I'd do it because you're putting out a newer/safer/more reliable product.2) Cost to replace the entire systems is tough to gauge without knowing the building size and style...

With the amount of cash that you have to invest, you can easily achieve net $10K per month. 

Hi - typically Mixed Use properties are going to require a traditional commercial real estate loan from a bank, small balance commercial private lender or for the larger ones a CMBS style loan.However, a newer "DSCR Loan" product for Mixed Use is making a comeback - which is a really great option for smaller properties/more beginner investors since it has all the same trappings as a residential DSCR Loan (30-year fixed, easy qualification, straightforward process) for a property with commercial units.Generally going to be limited to 8 units max and has to be primarily residential in every way (majority residential by units, square footage and rents) but if it fits all that, its a great option

These considerations are crucial for both mitigating your risk and supporting the borrower in achieving a better financial position to refi out. 

The "old way" (fundamentals) never go out of style.

Passive income is something talked about, but the majority of real estate investing is far from passive and what is called passive has payments for the passivity (management).Your why is strong, to provide generational wealth for your family and likely achieve time freedom long-term, that's awesome.

The solution I outlined above is a cheaper, faster and more likely to result in achieving the outcome sought by OP.