It has allowed me to gain wealth faster than renting, but now I find acquiring the next property very daunting.

I don't allow rents to get more than 10% below market, even on the best of tenants.

If the two of you were simply individuals owning the property as tenants in common and neither of you owned more than 50% of the entity then you could make the case that it was not a related party transaction.My fear is that if audited the exchange would fail due to the closeness of the related transaction. 

The restrictions you'll face with this is mainly due to zoning laws in your particular area, unless the zoning allows for more units or FAR (floor area ratio). 

You'll have to see if living with non-family renters is allowed in that apartment, but it is a way to get started - have others pay for your housing to save money and then rinse and repeat for a couple years. 

Your company probably wouldn't  allow renting in your lease.

So loosing a last name of the partner in the title would not allow me to 1031 I'f the partner cashes out; correct? 

My LLC for PM would be taxed as a sole proprietorship unless I had other employees, which would equate to being considered just another source of regular income for me, meaning the $1000 I paid would be taxed at my individual income rate (25%) for a total of $250, meaning I would still only keep $7500.However, if I had more than just myself employed by the LLC and made less than $50k/year, I would only be taxed at 15% on the money I allocated for PM, or in this case, $150.

As an investor, I've seen far too many people allow their emotions get the best of them and fall into that trap.

Not being there and knowing the local market, I still think there may be an option to hold that house and deal with the negative CF for a year or two....allowing the natural market equity increase to catch up.