Sadly they are happy if their maintenance fees, property taxes, insurance and at least the interest portion of their mortgage is paid off.

Do you think I would possibly could rent the house portion out as my Tennant would be my onsite "security" for my storage area.

Sounds like they aren’t paying taxes on their portions. 

The way I understood it is I will only pay 10 % interest on whatever amount I use for that month for the rehab portion of the loan.Now he also said he will open up a llc and I would just pay the state fee. 

If the 203K portion is not going to get your home to the FHA standards then you will not be approve it.

I suspect you will need to offer a significant discount in order to find anyone who is willing to live in a summer time location for 6 months between Oct - Apr.On the other hand...I live in a college town and rent the apartment on the first floor of my two-family home by the semester during the academic portion of the year and as a vacation rental between Jun - Aug.

@Bill Brandt they would be getting what it appraised for as a whole.Primary reason would be to help protect buyer for the ‘real estate’ portions property taxes skyrocketing.

And if the portion allocated to investment is at least equal to the net sale of your old property then you've got a scenario that would work for you to 1031 into something that you live in part of.The IRS does not really care where you get the money from. 

Are you capable of doing it all (marketing, networking, lead generation, contracts, scheduling, etc.) or would you do better just focusing on one portion of each transaction (e.g. lead generation)?

I just need a yes man on the larger money portion of it.