Using too aggressive assumptions (high rents & rent growth, low rehab costs & expenses, etc) will demonstrate a great return on paper but will inevitably disappoint investors when the deal fails to meet expectations.

Knowledge comes first, you must demonstrate your knowledge and it dang sure isn't with goofy guru stuff on sandwich lease options or wholesaling or the BRRRR plan, but about conventional areas of the industry.  

In doing so, they demonstrate that their intent is to purchase all of the properties but when the property doesn't meet their criteria, instead of dropping the deal they assign it to other investors for a fee.

Hopefully since you've demonstrated yourself as someone concerned for them, they'll let you in to discuss that you have it under contract and what follows procedurally.The ugly is when you have tenants who have been paying the landlord even though the bank is now the owner, or when they've received some sort of eviction letter and outright refuse contact with you.  

Yes, they could move out of the one unit, rent for a period of time (long enough to demonstrate that they did in fact intend to convert to and hold as rental property), and then sell and they would qualify for the 1031 Exchange on the entire property. 

We are not allowed to request any documentation for the dog, required that the dog demonstrate its task, or inquire about the nature of the person’s disability.

The main challenge is the IRR and value add which are more challenging to demonstrate an easy path to for your unprofessional investors. 

My luck is based on being first and therefore demonstrating I will close asap no hiccups, having a great realtor (listing agent is not tech saavy and my realtor knew how to work with him), and just plain emotional appeal (I will be living in it, it will not be run by a bad name property management company with an owner that will never see the place). 

A real estate operator with almost 10 years of experience and a ~$9 million portfolio of residential real estate has tasked me with raising capital to replicate the strategy which has demonstrated good returns.I would love to hear from the experts on BiggerPockets as to the best course of action.

Price your time in line with industry standards and create upside alignment with promotes, matches on your pref, and other similar types of deal structures that you can demonstrate encourage you to maximize the value to passive investors net of the risks you're taking.