There are other loan options out there besides FHA just as a heads up (5% and 10% down without having to pay the high "costs" associated with FHA loans).Each person has their own take, but if you are going in as an owner occupant I would personally advise trying to find not only a 2-4 unit, but a 2-4 unit with at least one current vacant unit so that everything can be a little bit more straightforward on the purchase.Also, if you do go the FHA route, the 2 unit one might be your sweet spot. 3-4 units have a self sufficiency test that doesn't usually pencil that easily in the Bay Area.

What about contractor investors who already have General liability coverage from their contracting business, would a vacant coverage be sufficient enough?

Awesome to have access to such a vast group of like minded people.

An LLC may be the perfect route for one person while an S-Corp may be perfect for another.While on the surface, both are doing the same type of business, the facts and circumstances regarding their financial and tax goals, their other sources of income, their tolerance for regulation, their family status and their retirement goals may be vastly different, which would affect the type of entity that works best for them.Taxes are not a cookie cutter, one-size-fits-all topic.

I understand that most banks like to use this formula: (Value of home - amount owed) .8I have enough equity in the home to where 80% of the difference in value minus balance is sufficient to fund my construction project. 

But that is something the vast majority of people do not think about (or won't be able to - imagine a successful dentist that runs a local practice).It will be interesting to see how the Bay Area and SoCal deal with housing.

The rents are vastly under market so if we fix it up, and can even get one of the two units empty, it should work nicely.

If your primary still has sufficient equity, why not take an additional loan on it? 

Long story short, I disagree with a lot of what is being said in these comments.The vast majority of part time agents treat it as a hobby, have no idea what they are doing, etc.

I visited sites similar to this, but didn't find information to be sufficient enough.