Problem is someone is living in the other house and his family who owns the house now has asked if he can remain there, paying me $400 per month until I'm ready to begin work on the house.

I realize some of my funds will have to remain in the stock market (my current employer's 401k for example). 

So dividend income will remain dividend.

So we talked and I made him an offer...My offer was 42k(his sale price) for a 5yr land contract and a balloon for the remaining balance in month 60(3k) He said he needed $650 a month and before his mother moved in rent was $750.He countered with 48k and a balloon of 9k at month 60 (comps in area 50-60k)The property is in good condition (2bed 1bath attached garage)My exits would be sell in year 4 and cash every one outSmall refi in year 3-4Pay the 9k and keep as a rental.Keep in mind there is no money of mine in this deal other that closing cost with my Attorney.If his bank calls the mortgage Due I'll sell or refi myselfSo is the extra 6k he is asking for worth it?

He would be required to satisfy the principle on the loan from the first position lender (which in this case is your private lender).  

With an option to buy the remaining payments after 24 months of seasoning.

In other words, if there was a foreclosure and the property sold for less than the total of all the outstanding liens, first the 1st lien would be paid in full, then any leftover funds would go, in order, to the remaining liens. 

@Michael Johnson what I found as a rule of thumb is 75 units to be the threshold.The only way to really make that decision is to plug in the numbers and see if you can pat the on-site staff and still remain in the reasonable range of OpEx to Income ratio (%50-%55 for tenants paying bills property and %60-%70 for ABP properties).Every property will reach the balance point at a different number of units based on it's specific income/OpEx situation.

It has been improving it’s ranking since 2009, and has been in the top 25 for economic growth since 2014.Manufacturing is still a major industry, but with new investments from GM and Tesla the city should see some stability in the industry.Alumni from Michigan State University provide a good base for high tech and research jobs in the area.Orlando, FLThe economy has been improving every year since 2012, and the economic growth ranked #9 on the Milkin Institute’s 2016 report.Tourism remains the main industry for the area with Disney and Universal creating a lot of jobs in the area.In addition to the Tourism industry, Orlando has a strong Health Care industry, which will help it attract retirees.Raleigh, NCThe economy has been in the top 15 of the Milkin Institute’s top growing economies for the past 10 years.The Research Triangle that includes NC State, Duke University, and UNC Chapel Hill support a lot of growth in the R&D industry and the alumni provide skilled workers that attract businesses.San Antonio, TXThe economic growth has been in the top 25 of the Milkin Institute’s top growing economies since 2008.In the past, the economy has been highly tied to the Oil industry.

You could also buy two vacation properties and live in each of them for a period after satisfying your 1031.