I would suggest just that, house hack a 4plex for cash flow, and save for your second creative finance deal and grow from there.The idea here is you should be paying zero for your roof (or close to) before buying a second property.

We did notice some water damage in the front of the house but was told the roof is in good condition.

Especially for our roofing business we have looked at expanding to Lexington. 

Texas- Houston.I had a roof claim which got denied 2 years back for no solid reason.

I cannot see how build two, say, 1200 sq ft houses with two roofs, two foundations, presumable about 25-30% more windows and siding is going to be cheaper a duplex that might have a little extra fireblocking and soundproofing.Now, maybe your GC is thinking that detached homes tend to get higher rent than comparably sized and finished duplexes.  

a lot of new investors, though, hit a big capex expense in year 1 or 2 or 3 - roof, HVAC, an expensive tenant turnover - and are just blown away that all their "cash flow" is gone.hope this gives you some things to think about - happy to answer any other questions you have.

The foundational items, roofing, HVAC, plumbing and electrical were newer and needed very minimal replacing and updating.

Insurance is through the roof over the past couple of years.

This along with your roof should be one of the 1st items explored. 

On my end, I've never asked for one even when there was quite a bit, as I buy investment properties and expect I may have to replace roofs, drywall and other things that might be moldy or contributing to it.