With 10% or more your option contract will be an installment sale, that will give you a tax liability of a sale and can also mean that your buyer may be entitled to  all of her money back.It's the seller's responsibility to ensure a buyer qualifies for terms agreed with an installment sale, look up "ability to pay rules" which will apply to an installment sale with a buyer who will occupy a residence.

Unless you can find a commercial lender that will qualify you to purchase them with a portfolio loan, then they will need to be acquired individually.

I've spoken to a couple mortgage brokers before finding BP (not ones familiar with REI) who have said that the difficulty is having the income to qualify for both loans.

So, if you qualify, you will still be able to deduct it on your new home that you'll be renting for yourself (but obviously not on the home you own since you'll be renting it out and no longer be living there). 

I've spoken to my CPA and -- cutting to the chase and factoring in passive losses, etc -- if I were to 1031 it into different investments, I'd need to spend about $100K of equity against about $300K of debit (for a total of $400K) in order to qualify for a "like" property and avoid capital gains.What I'm looking for are thoughts on the best strategies moving forward. 

The adult children, silent partners.We wanted to have the newly-formed LLC take out a HELOC for the repairs for a 8 month timeframe — house is owned outright, the ARV is five times the cost of repairs so the HELOC math would have been a slam dunk — HELOC qualifiers don’t get better than this.

When you think about a retail buyer, those that could afford/qualify for a mortgage on a $125k house of this nature are probably more inclined to rent for another year or two and step up to a $140k-$200k house where you are getting stabilized neighborhood, not fringe and much more house. 

Should I forget about qualifying for a loan or is there a way?

All I can say is you will need to up your credit to 640 FICO to qualify for a loan.

Are they pre-screening to ensure that you are even a likely qualified prospect?