.* Collateral for Loans: I haven't explored this option, but my concern is keeping the asset protected if a project goes terribly wrong.* HELOC: this is how I believe I could use the equity and protect the asset.Is the following a correct assumption? 

Quote from @Leslie Cunningham: Note to self:  never rent your newly renovated family home to tenants...it's too much of a risk and too heart-breaking.That's a common claim, but it's completely wrong.

Assuming i find a property management team that can be trusted, and that the tenant is properly screened, how could something like this go wrong?  

@Jason Greenway we don't recommend novice investors starting in Class D or -C areas.Too much can go wrong that they won't be able to handle:(You'd be better off in the $80k-120k areas (Class +C to -B). 

Or am I looking at it wrong?

Regarding the tax situation, I used the wrong wording in my original post.

My wife's fear was that something would go wrong and I would lose everything. 

You need 4 or 5 things to go right for it to work and only 1 thing to go wrong to break you. 

Don't get me wrong, I value the learning, I'm not looking to cut corners...I just want direct apply to real world strategy with no upselling involved.

But you cannot 1031 directly into your next primary residence.I say directly because there is nothing wrong with doing a 1031 and buying a new investment property and then a couple years later converting it into your next primary residence.