I agree with everything @Michael Baum said.Many people, including myself, have used a 10% down second home loan to buy a property used for a STR.

If we were to find a duplex/triplex/fourplex that met our criteria, I was thinking about maybe owner occupying one of the units in exchange for being able to use the 203k loan - for not only cheaper financing but 3.5% down + being able to include fixup costs in the mortgage.

Everything should be done in hosue, including owning the property, renovations, and management!

This includes converting it to a rental property or refinancing into a different kind of loan. 

The good news is that these properties can indeed be purchased for various investment strategies, including rentals, BRRRR (Buy, Rehab, Rent, Refinance Repeat), or fix-and-flip projects.Purchasing as a Rental or for BRRRR:You can acquire a Freddie Mac home to hold as a rental property or implement the BRRRR strategy.

32k or even 42k on a half million dollar house doesn't sound all that good.What's your projected cash flow after all your expenses including a likely higher mortgage payment than the current owners?

Portfolio = Income derived from financial instruments like dividends (including REITs), interest, royalties, and capital gains.Mostly income w/out loss potential, and favorable tax rates.Cap losses may offset cap gains w up to $3,000 loss.

But I agree with @Stuart Udis - when making offers on occupied rental property, I always review the Financials including the RR & T12.

What should the "ideal" comprehensive check list include?

The agreement stipulates:"The owners agree, that no water shall be used for commercial purpose, but only for their private domestic use including vegetable gardens and livestock maintenance."