I imagine I can get his wages garnished or maybe collect from his tax return.  

Before you close, can the rent from your buddy and the midterm tenant cover your mortgage, taxes, insurance, plus a bit extra?

The only part that Property 1 pays on that loan is the escrow for property tax & insurance for Property 1.Thank you for your insight.You need to look at purchase price to determine cost basis, not how you financed the purchase.

To make a new property cash flow with current prices, interest rates, taxes, and insurance, you're putting at least 40-50% down.

Sometimes it can be difficult to collect and some landlords will keep any unpaid utilities out of the security deposit, though CA is one of the trickier states to do this in.

Main question in other countries is ownership and taxes.  

Plus it makes bookkeeping and doing taxes etc. more complicated and annoying/ expensive.

You'll be able to defer a bunch of tax with this purchase. 

Im looking to secure financing for my real estate business.

Since they're low income/tax credit, they just don't make the kind of money needed to pay those huge premiums.