For path #2, you mean purchase & renovate a 3-5 unit building right?

He's probably someone you don't want in your unit for the long term.

Then we keep the accounting straight via Quickbooks with each unit a different Class.

For instance, targeting multifamily properties (2–4 units) is a great way to grow your portfolio.

An experienced agent will list your property with the language, "no showings until an accepted offer", to avoid violating your tenant's rights to the peaceful enjoyment of their home - possibly resulting in their lack of cooperations and a lawsuit against you.

Her husband is also a GC who can help build additional units as needed if you get something that can fit an ADU.

In Jersey City, it doesn't kick-in until 4-units - so for the smaller multis or single-units it is not a problem.

I understand this is not a requirement, but I have never received a damaged unit from an inherited tenant or any legal issues.

The best way to do this is to renovate a unit or two to the specifications to bring it up to market.  

I believe I can do this with the upstairs rented out at $1,650 a month and $1,750 for the main floor unit. 3bed 2bath down and 3bed 1bath up.