Large utility room with space for shelving and full sized washer-dryer.

The upstairs is being rented out for $1,000 per month. 2) Zillow says it's worth around 201,000.3) If I stayed in the bottom portion and raised the rent of the top half of the building to 1,200 (based on the competition in the area, I would be able to get this easily), I think I would be able to pay the mortgage pretty easily.

.- Depending on size of the property, scope of the work, and how much rehab you're willing to do, you can always consider individually submetering each unit.

Other things we would like to consider are pet type and size (we accept pets), references, income etc.. 

What portion of the $500k is capital gain (or exempt from gains if this was your personal residence)?

@John BergstromMany taxpayers are finding themselves taking the standard deduction as that has increased substantially starting in 2018.You may be able to "shift" some of the mortgage interest/ property taxes as a business deduction if you rent a portion of the house as you suggest or use a portion of the house as a home office.

Assuming 6.6 percent interest rate and 10 year repayment on 240k that’s 2737 a month in debt payments for that portion.

This strategy makes sense to me because of the value of my time as well as my ability to fund down payments on medium size properties (10-20 unit apartment buildings in C areas).

THIS IS MY QUESTION"    If you're contractually obligated to live in the duplex, you will have a hard time getting a mortgage for the second primary residence unless you have a change of circumstances like a job move or an increase in family size. 

Basically, they don't want to take the risk that if things don't go as planned, having to chase you across the border.Smaller more local banks may be more flexible if you are buying 'small' properties but if you are looking for a mid-sized (250K - 2M) commercial loan - it can be extremely difficult.Good luck - Oren