We want to use him for a portion of the downpayment/rehab costs and give him a return on his money, but not use him for a third borrower.

I'm most excited to learn how to do my own repairs and definitely plan on doing a good portion of the work myself - the knowledge gained from that is essential. 

I would suggest that if the rented portion covers all of the expenses that you take your income and put that towards another property.Good luck!

At the same time, they are pushing to legalize "home sharing" where the owner/occupant lets out a portion of their home to a renter, as this is something their competitors have yet to offer.

The part I would like more help understanding is the "refinance" portion.

I don't know your floorplan, but you might consider expanding into only a portion and keeping the remaining as a smaller unit.

There is a basement, however, unfortunately, it is a finished basement, meaning I would have to remove a good portion of the ceiling drywall to get at it...

Does the commercial tenant pay any portion of parking area sealing or common area maintenance?  

I would probably try and use my portions of those profits to invest in more buy and hold properties.I know I probably missed some details but as a rough plan does it sound plausable?

Anyone have any experience recouping portion of cost from contractors for this type of thing?