Thirdly, would we be able to allocate some of the money from the sale of the Mexico house within a 1031 for renovations on the newly purchased rentals or is it set up to allow only for the purchase of the properties? 

@Lindsay West Yes, she can combine the two strategies to avoid taxes, however notice the critical caveat pointed out by @Wayne Brooks: the part of the sale price allocated to 1031 cannot be applied towards her new FL home.

And you can allocate those proceeds in any manner you want. 

Scenario #2:Sell SFH, purchase 10 smaller propertiesIf I sell these 10 smaller properties at some given time separately in the future, do I only pay the deferred taxes on that portion of the 1031 that was allocated for each home?

If so, how do you keep bills/allocations separate when reporting expenses?

Letting a management company take over My question is how do you analyze a property in order to allocate for management fees.

@Todd Dexheimer, Actually in her case the 1031 and 121 primary residence would both be available on a sale according to the specific allocations. 

The management fee allocation of course depends on whether you will self-manage or hire someone. 

@Michael Dorr, Again, you've stumbled onto a brilliant application that actually will allow you to take advantage of tax free and tax deferred income and reduce debt at the same time if you wish - or to continue to leverage.If you hold long enough that you qualify for the 121 exemption (having lived in it for 2 out of the previous 5 years) then you would most certainly qualify for a 1031 exchange on the other portion.What you exchange and what is tax free is simply following the allocation your accountant sets up when putting the rental half into service. 

Here are few basics : % of ownershipsDispute resolution, etcDeath/Disability of a partnerProfit/Loss allocation and capital contributionI would recommend consulting a good attorney to get a list of things that you and your buddy need to discuss and have a framework to draft an operating agreement.