I had an idea that was a mixture of a couple inquires I had relieved on how to fund a deal.I have a friend who is quite wealthy as he and his woman are doctors.

A bit risky, but it worked.Having said all the above, I did not have the complication of a mortgage on these properties because I used line of credit funding on my principle residence.  

Just because they will be putting tenants in the units does not mean that they will be the sort of good tenant that is desirable; chances are good that since they have no intention of ongoing management of the building, that they aren't going to go through the added effort of screening tenants to be certain they will be tenants with good character.  

There's extra capital needed to remodel the 3-5th floors, but I don't know what kind of options there are for funding that.The area is on the border between downtown and a less friendly neighborhood, but the city just got a big government agency to move in about a year or two ago.

And after 30 years of a $1.1M paid-off house appreciating in an up and coming town, when I decide to downsize at the age of 65 i'll fund a good chunk of my retirement, or hand off a nice asset to my kids.If you could hypothetically take $100,000 on a HELOC and turn it into $5,000 per month cash flow would you do that?

If you don't have the funds to advertise it will be more difficult but no immpossible.

Here is just one developer at the helm http://matthewsllc.com/ .The City of Mishawaka which in my opinion is joined to the City of South Bend at the hip has the second largest retail corridor in the entire State of Indiana and a highly desirable school district.

Or is there a deeper mindset that has no desire for the additional "baggage" of owning a home? 

So, it does not make any sense to me, to buy an essentially breakeven, rental property at Retail prices to hold on to for the Hope that it will go up in value over the long term as if it were a Stock or Mutual Fund.

Use a transactional lender to fund the deal.