My tenant told me that since she's on M2M she is not legally bound by a lease and can move in whomever she wants. .  

You can make or loose money in any market.

If one buys a 1-unit residence for $100K, I believe, that they are loosing out on a largest opportunity of buying a 4-unit, for $1.4M, for example.

The seller isn't bound to anything and can get out of the agreement at any time.

To summarize, if you close with same lenders, they are aware of both files and they will calculate the new total monthly debt, if you are not going with same lender then you should do the refi cash out first as the DTI (debt to income ratio) is more loose on HELOCs. 

(Monthly rent $1700 - this info is from the previous tenant that lived in this house) We would loose money if we sell our house now.

I'm not making leaps and bounds of money off it by any means but it's a start!

First of all, do not quit claim but use a warranty deed instead to avoid loosing your title insurance.Second, deed your property into a land trust where you are the initial beneficiary.

Use a warranty (or special warranty deed) instead to avoid risking loosing your title insurance.Also with your lender you may trigger the due on sale clause.

Violation code is very loose and not detailed.