His goal is that the properties are maintained well since they touch the funeral home.

@Bill NolanAssuming you can manage and maintain the home cost effectively, meaning keeping it occupied, collect rents, and doing the repairs then your plan could work.

I've thought about pocket neighborhoods with smaller houses though not tiny homes, and lots, where people can still maintain their independence but have less maintenance, and close proximity to neighbors, etc.

So is this house simply allowed to maintain 2 legal units and also allowed to do major renovations to both units simply because it is “grandfathered in” - since it’s deemed a 2 dwelling property because of its 2-11 property code, is that it?

They own and maintain the equipment and collect the money.

I was trying to work with him barter/reduced rent to maintain property.

If you are capitalized enough to purchase, I suggest you hold the cash to maintain a strong credit profile and look for purchase + renovation funding.  

We are offering short-term leases through spring, maintaining the rents as is.

Are there certain limits I should be looking to maintain or lower to get a better price. 

Just because your personal lifestyle doesn't warrant being an occupant homeowner, doesn't mean you can't benefit from others with lifestyle needs necessitating a backyard but without homeownership, that need a housing provider (ie, you) to provide and maintain for it.