Since this is a real estate site, I would say most responses would be for going with real estate :-)To go along with that, when investing in stocks, you have very little power on what happens with your money after investing.

The fact that you will choose to forgo the market rent and live in the bottom portion is your choice.  

You, however, can go to the Surplus market and for instance forgo coverage for your roof or water damage.  

My question is what are the future ramifications, if I decide to forgo the title insurance, keep the deed the way it is and plan to refinance in the near future and possibly sell at some distant future?

Also if you target AHRN or military only for your tenants when you leave, its possible you might be able to forgo having a property manager because you know there are other methods of retrieving your rent if an issue comes up (it's almost sad how easy it is to garnish federal wages).

Compare that to the cash out of pocket for down payment plus rehab for going purely conventional.You probably want to plan to hold the HML for a year before the refi.

Is there anything I need to watch out for going about this?

I know I could offer a buyout to one of the tenants, but I am wondering if there is a threshold of time in which lenders will forgo checking for occupancy.

ya based on your response above I don't see how residential pencils ergo the property was sold for a song..  

@Tim Swierczek Thank you so much for going into detail about the 203k loan.