Properties with existing separate living spaces are grandfathered it. 

Now they have enough global cash flow and equity from the properties to keep getting lender loans even if their income is not that high maybe 80k a year or so.Then there are the doctors, tech space people, etc. that make very high incomes.

Smaller has higher occupancy, less rate fluctuation; bigger has a lot more rate fluctuation AND occupancy fluctuation, but you make bank in the high season and in the 4+BR space your ROI is typically better than the smaller ones that are more consistent.  

In the meantime I can make the garage into a duplex or live/work space to rent on the back of the lot I retain? 

The properties that I rent would be fully furnished and then listed on short term rental sites such as AirBnb, HomeAway, VRBO, etc. as available spaces for travellers using these platforms.

My goal is to be more of the hands off portion of the team with my time constraints. thank you in advance for the help. 

I would recommend learning as much as you can about the real estate space and see where you can best fit in based on your strengths and current situation.

There is a crawl space where all utilities are separate (gas/electric/furnaces/water heaters).

Granted, I've been actively engaged in the commercial real estate industry for 17 years so I know and understand this space well, so for me it's likely easier than for other investors new to all real estate types.That said, there is a reason that many of the investors who've been interviewed on BP, written books, and grown a portfolio often scale or "trade up into commercial" over time, so they can achieve the benefits I mentioned above.

Yes, this may be a big NO-NO for most of you, but we are considering to relocate there in the future to have more space.