We are builders also so was wondering if we should start with an 8-12 plex before venturing into a larger apartment venture. 

I am planning on renting out two rooms, so my rent will be less and I will have a larger amount of cash flow obviously every month.

I used to be a large real estate investor in Oklahoma and Florida.

I was uncomfortable buying homes for $125 when I was able to buy better homes that were larger and in better neighborhoods with better lots in the high 80's to mid 90's.

It doesn't make any difference how many books you read or podcasts you listen to, you'll still make mistakes... but it's better to make mistakes on a smaller project that you can learn from and then use those mistakes to be more successful on your next larger deal vs starting out with an apartment building where the mistakes could potentially bankrupt you. 

We want to give the buying partner a larger share so he essentially has no out of pocket expense.We want to ensure that we do everything above the board.

If you are planning on some major renovations, you might consider it, but if not, I wouldn't do central air.

What are you thoughts on selling a larger valued multifamily property for a smaller one?  

If the purchase price plus renovation fits the lender's LTV criteria, many private lenders will consider funding the entire project.

@Shannon K. if the ARV is sufficient enough to cover your renovation and CC, then the short answer is yes.