So we have been trying to turn that around and followed Dave Ramsey's plan to help pay off most debts.

You will want to continue to keep saving up money and paying off debt to put yourself in a position to buy, but when you're ready you can buy a property and have the tenants paying off the majority of the asset for you!

So basically refinancing from an owner-occupied loan to another owner-occupied loan (conventional), giving me the ability to eliminate PMI once I reach 22% equity + capture more equity from the cash out refinance.

Those loans did not have to comply with RESPA because the property was not used as a home (Airbnb only) so the bank had more leeway with debt to income and such.  

If the more expensive 3500sq ft house was going to prevent me from getting another loan down the road because it added an extra $150,000 of debt I might stay in the existing house for a while longer and buy the 2500 sq ft rental house.

The debt types that typically garnish wages are landlords, care loans, furniture loans, credit cards, personal loans, etc.   

Cashflows about $300/month after debt/expenses.

I guess that is possible if the temporary debt ceiling is not raised again in Dec (but also unlikely since 100% of the time in the past, the feds have raised it as opposed to defaulting).If there was any major downward pressure on RE pricing, I would halt fix and flips until the dust settled.

No debt.

I finished grad school in 2015 (with $250k in debt!!)