This makes me wonder regardless of how objective he claims lead generation is, if their is a risk of inequality happening on this front (I know not to expect leads from my broker to be my bread) but I just am not sure if there is a risk of conflict of interest.

I may get up to about 71K in Equity I could leverage to buy another rental in the same city.

I currently own my own house in California and have approx $120k in equity on my current home (just some background info). 

I had built in equity already.

I currently self employed, have a primary residence that has about $200k in equity that I can't access at the moment unless I sell. 

It doesn't even meet half of that.You would need to analyze where in the cycle New Jersey is for SFR.Some places like California also had little to zero cash flow but some properties doubled to tripled in equity value after the bottom in 2009.If your area has low rents and also has peaked or had a big jump up in value then now may not be the time to own a rental there.

Post deal picture(option 1): gaining 40K+ in equity, renting the condo and new SFR we would have $550 in CF additional after maintenance and vacancy.

It seems like $140,000 in built in equity seems to good to be true.New Build DuplexKent, WA - 3,155 sg. ft. 3 BR/2 BA/2 Car GarageLand: 40,000Cost to build (from Reality Custom Homes): 195,000Site Prep: 10,000 (relatively flat land, utilities all easily accessible) Permits and fees: 20,000Landscaping, Fence, Driveway: 15,000Upgrades: 20,000Closing Fees:10,000Total Cost: $310,000Estimated Appraised Value: $450,000 (based on the sale of nearby townhouse w/similar stats)  I believe duplexes are appraised as separate units and then have their values combined. 

I have about 100k in equity in my home.

It would give them about $80K in equity.