Hello all, My name is Jason Dixon and I'm currently reading every book and listening to every piece of information to arm me in my future endeavor of REI.

No- It's an arm's length transaction. 

ARMs in the U.S.A. seem to not quite as attractive, nor flexible, as our variable rate mortgages (VRM), but it would be a tool worth studying for the future.Alternatively, if you can refinance a 30yr fixed term with minimal penalties or points, then that product should be fine.

If there's an arms length transaction what's the issue?

Sometimes there are restrictions on "arms-length" sales.  

10 year arm mid 3s.

Unable to make the balloon payment,and depleted the HELOC, the house refinances at a higher percentage rate and an ARM.

Also, to comment on your original post, you must remember that any and all investments you make with your Solo 401k plan must be arms length.

I've done some digging and I can't find anywhere that states a RM comes due while the holder is alive and living in the property.

(that's the loan you describe in your OP as the first mortgage 41/2%, 20 years, 5 year arm)  This bank will  do  an equity line of credit against properties I already own.