Unlike just 3-6 months ago where almost everything was a bidding war (at least in my market anyways).

There are numerous other reasons, but that is the main one.

There are three costs you must be very familiar with LandSoft (carrying costs, entitlements, impact fees, association if applicable, maintenance, etc)Hard (home construction as well as site construction)Have done numerous MF and SF developments. 

Buyers are jumping on them right now in hopes that they won’t have a bidding war.

@Joshua Feit reads as though it is in a war zone, Also what about allowing 10% for V/M ?

I just visited an old, pre-war townhouse multi-family, and the boiler and water heater were on the first floor in the back.

I have looked on numerous websites and have been unsuccessful.

However, if you are talking California almost anywhere in California this should prove to be a profitable strategy but it also depends, not in the middle of the desert for example or in depressed areas, war zones would also be obviously out as well.

Would you all recommend keeping the property as our first rental or selling the property and reinvesting the 120k in numerous properties?

Would you all recommend keeping the property as our first rental or selling the property and reinvesting the 120k in numerous properties?