Since you're living in it, the worst case scenario is paying the full mortgage which hopefully you would be able to do anyway. 

Granted, I don't know any attorneys here in Texas who would assist in a CFD but that's just because it's common sense to steer clear of these beasts. 

I would go with your gut on which home you would rather live in.

However, you can use a cost segregation study to break the property into different class lives and claim more depreciation up front.

I live 100% from the income from our holdings. 

If and when you have questions about financing in the Chicagoland area I would be happy assist.

I originally lived in the casita while I rented the front home out.

Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.If you’re married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance can’t be more than $12,500.

What I've found so far is the property has to be self-managed for the first year and you either need to live in it 14 days or 10% of total days it was available to rent, whichever is greater. 

Obviously you’d never sell until you’ve lived there 2 years, that’s a 5 figure mistake.