Even if I buy commercial at a lower cap rate (lets say 6%) and raise the value in repairs, rent increases and fat cutting to lets say 8.5%, my final cash on cash returns are still lower than a average to good SFR deal. 

I've been driving around and running into a lot of vacant houses, some even burned down or completely boarded up.  

Nice post there was a thread on Do hard money actually been many of them. they will actually fund 100% but you need to pay them a 3k fee or there about up front with no guarantee of funding then its something like 650 per submission according to those who have tried it and posted on BP .. so many of the folks posting on the thread about the company paid the up front money 2 to 3k the 650 submission fees a few times and the deals were never good enough in the eyes of the funding company.. so there you go out 3 to 4k and time and effort.. some on top of it some  were naïve enough to put down non refundable EM with a wholesaler and lost that as well.its quite a model... little to no down side risk and prey on newbies who are the most vulnerable and want to get into the game and I suspect most of them even pull the 2 to 3k fee off of credit cards.So what do you have1. newbie  ( does not really know what a deal is yet2. limited capital but burning desire so they risk the 2 to 3k3. only a screaming deal gets funded as you stated.. newbies generally don't fall off the truck into screaming deals.then you have on the internet  what I call pump and dump due diligence scammers  these are flat out crooks of the Nigerian prince scam mode.. promise you 3% loan 100%  two e mails and your approved.. broken English just need 500.00 to move forward...

In larger non-recourse debt placements, lenders typically require you to form a single-purpose LLC to own the real estate and be the borrower, so again all of the calories burned on trying to establish corporate credit is for naught as this newly formed entity will not have benefitted from that previous work.As for your other questions, in a 1031 the taxpayer buying and selling need to be the same. 

Be careful to not get burned by someone that doesn't actually have a good deal.

I've been burned playing this game.  

So it’s certainly not a cure-all, but it does help recovery if they burn down your house.

However, I would love to start building equity and pay rent towards a mortgage rather than burn it on rent, and a condo seems like a good beginner property.Thanks! 

However, I would love to start building equity and pay rent towards a mortgage rather than burn it on rent, and a condo seems like a good beginner property.Thanks! 

Tough to make decent cash flow investing in your neck of the woods, too many wealthy government workers with money burning a wholes in their pockets.