In our state we are allowed to charge a max of 2x rent for a deposit, so what if we systemized deposits to be a flat $1,500, or they can pay $75 per month for a warranty on damages (only damages) of up to $1,000.

Hopefully I can sell as a package or within the 1031 timelines allowed, which is definitely a variable of risk, but I have a couple investors I've turned down over the years who may be interested.  

Moderation in all things of course but the 1031 does allow you to capitalize on both of the above financial principles to your advantage.

I have been told that rolling these funds into the right Roth would allow me to use them for real estate purchases without tax penalty?

My initial goal was to do airbnb with it but I called the leasing office and found out it's not allowed.

After reading about the 90 day rule (see below link) for acquisition indebtedness vs home equity indebtedness, I'm still uncertain if the cash-out mortgage interest on investment properties count towards the IRS allowable mortgage interest deductions .

And it's only been getting worse the longer they're allowed to do it.  

Also it is not clear if the 2 additional bedrooms are an additional unit but if they are make sure that the zoning allows for multiple units on the property.

With regard to how much the bank will allow you to cash out, that's another story. 

These are conventional loans that allow 3% down (5% for multi-family), and don't require mortgage insurance for the entirety of the loan like an FHA would.I'd like to get some feedback on these different loan types, as I haven't seen them discussed much on BP.