What would worry me more than steering residents is allocation of staff.  

@Matt Said, There will be some accountant calculation needed but you should be able to pull out your original primary residence capital allocation and profit from the primary residence side tax free.The allocation for the investment side is subject to 1031 regs which are a little different. 

I am digging into what projects these funds would get allocated to. 

If I allocate the time to attend a real estate meetup then I sure as heck am going to make it a priority to get to know someone while I'm there.

So, gain allocated to personal portion will be shielded with sec 121  ( 250k -if single) and gain allocated to rental portion can be invested into other investment property with section 1031 like-kind exchange.  

The only difference is that usually the farmer lives in the house and when they sell we take the allocation for the amount of the house and yards and the farmer gets that profit tax free from the 121 primary residence exemption.The remainder of the farm land the farmer 1031 exchanges into other investment real estate and defers all tax on the sale. 

You can allocate your proceeds in any manner you want as long as you use them all. 

I was thinking I could consider the savings in down payment as his contribution to the deal, and allocate % ownership accordingly.  

Nobody as a sponsor wants to work their tail off creating equity on a deal for the investors to take it all.For me I make a lot of income transacting commercial real estate deals so doing a syndicate has to give me at least the same or greater return for time allocated.

A portion of each payment is allocated to return of principle, gain and interest.Most importantly you will recapture all depreciation in the year of your installment sale.Didja know know that in the event that you found yourself needing to do a 1031 there is a way to combine a 1031 exchange with an owner carry note?