An example, a small down payment initially, but the note has now seasoned for 60 months with on time payments documented by a third party servicer.

HI Jewell,If you were to use FHA again, this could trigger the FHA 100 mile rule + 1.75% upfront fee, however with a few exemptions Indeed FHA allows you to put 3.5% down payment to invest in 1-4 units.

As mentioned elsewhere, breakeven on cash flow is not the same as break even for taxes.Let's make some assumptions:Rental income = $1000Mortgage payment = $400 - but $300 is interest and $100 is principalOther expenses (repairs, advertising, utilities, etc) = $600Depreciation = $250The above scenario creates a break even from a cash flow perspective, however the tax scenario looks like this:Rental income minus the mortgage interest (principal is not deductible) minus the other expenses minus depreciation looks like this:1000-300-600-250 = $150 LossIf your income is over $150,000, then you cannot deduct that loss, but you can roll it over to future years. 

Then get photos and get third party verification that everything was done right prior to making your final payment to the contractor.

The limits are not high at first, but they can build with good utilization and payment history.

The biggest advantage of using someone local to where you're buying is that they will understand taxes, insurance, and similar items very well when it comes to DTI/DSCR calculations and payment quotes, and they will likely have a local network of service providers for ancillary services (survey, inspections, etc).

I was able to sell the SFR for $62,000 with a wrap around $50,000 mortgage at 12% interest and a pre payment penalty if paid off before 10 years.

Consider FHA loans for lower down payments and reserve for repairs or upgrades.

Mortgage payment is $1671/mo. 

Spend the time now reading and learning so you will be ready when you have the down payment for your house hack.