At one point I was told I could obtain funding (non-conforming was the term that was used) with 12 months of bank statements.My question is what would make me more appealing to a lender; should I continue with 1099 work or go to W2??

There's a specific forum for House Hacking.You'll want to spend some time reading through there as it's a common topic.

Buy an existing house to live in and add an ADU in the back.

Quote from @Garrett Brown: Thank you, it is from a company called OOD for the mirror house and then everything else we build around it.

This is a 4-bedroom, 2.5-bathroom single family house.

Ignore seller finance for a second...Can you buy a house, put 20% down...yes.

We know they’re hard working and would like to continue working with them rather than move toward foreclosure, but we know they’re in over their heads if we continue under the current terms of the mortgage and don’t want to set them up for failure. 

The 2/5 year still applies no matter how long you have owned the house.

I am looking to connect with the investors there as the promotors are continuing to take Asset Management fees to the tune of $450K a year (on top of PM fees) even when their payout to the investors is around $20K a quarter (not meeting preferred) and the overall fund is negative about $450K.

They are a great financin goption if your goal is to continue to scale.