He’s explained that this opens the firm to malpractice suit from me the “buyer” if I can’t get a mortgage.

Who here, specifically flippers and whole sellers, use social media (Facebook, Instagram Etc.) for marketing.  

@Mindy JensenYes 10$ does sound cheap but we run an Air BnB out of the guest suite attached to our home..

Learn the systems and what is needed so that you can follow suit. 

My preference is to add a master suite in the loft with a 3/4 bathroom. $15k will likely cover everything else though.I think that's about it.

I was just was wondering on what would suit me best .

One thing to think about is that if you're contemplating doing a 1031 and buying a $500K investment and then converting that into your primary you will probably make even less than you are now on the investment house in the interim because you'll be trying to get investment cash flow out of a property that isn't best suited for investment use.It can certainly work but I sense a lot of other concerns than just the desire for a $500K primary residence.A lot depends on your geography but one option would be to do the 1031 and supplement with cash from the sale of your primary and purchase $500K of investment property free and clear. 

But, you need to know what you are best suited for and really enjoy doing.

Looked at passive investor opportunities and concluded that it does not suit my style.

You are ready to flip, design submit permit plans and built to suit.