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.  

@Brandon Rush I like what Allan said because it demonstrates the mindset of a market that may have moved from investing to speculating.  

in regards to #2Some recent scenarios I have closed demonstrating seller advantages:-Scenario A - How a seller can benefit from pocket listings - More exposure over a longer period of time can lead to more opportunities and choices.1.

I am brand new to this whole game, so pardon if this question demonstrates my ignorance, but why would someone pay $900-1000 per month rent for a house that they could buy themselves and have a $438 mortgage payment?

Put together a nice portfolio of your rentals, demonstrating your expertise in finding cash flowing property and managing them profitably.