How can I design or propose these apartments to meet this requirement while making them functional for long-term residents?

It appears you are focused solely on the financial components of the project without understanding the insurance and liability factors of self-performing the project in the manner in which you propose.

Nothing in what you proposed is realistic.

There is still talk of SR-30 (former proposed SR-801) that would connect L-303 to L-202.

In my case, I have relatives who are builders (in a different state) but have good connections with subs, etc. and I am spending the time to personally review all proposals (obtaining some on my own as a check), etc. so that I am confident that the cost incurred is appropriate. 

this is what i have so far: the sell price is around 300,000 (under), I'll be proposing 10,000 down, 30 year loan with a ballon payment of 7 years, 4% interest, $800/monthly payment to seller. 

I’m sure everyone has heard the proposals of a possible 25% unrealized capital gains tax.

When you get the sheriff’s proposed distribution of funds, there will be a copy of a title search that was performed by a title company selected by the sheriff; that title company is possibly the best place to go to ask whether you should buy a title policy - they did the search and should be willing to insure.

The Fed is only proposing 75 basis points in reductions next year IF everything goes according to their plan.

As far as your proposed solution seems like it should work in terms of getting you a “first position” HELOC.