The chances of you taking $150,000 and turning it into enough passive income to be able to live are as likely as you taking $150,000 and putting it in the stock market and living off the principle. 

They are stuck in 2014 when notes were so cheap and easier to make money: now pricing is tight and even just buying to resell is challenging.Note investing can be more passive than other aspects of real estate but still takes a lot of work as well as a lot of experience and knowledge as there are many moving parts that can go wrong 

We have become good savers and save about 55% of our total income. 

The rental income at purchase was $8400/mo. 

I'd add a late fee to the lease renewal, but if they are struggling to pay rent now, when the baby comes, they will be down one income for a bit and then have child care, so will likely have more problems. 

Minus re-zoning expenses- Any advise for this transition into low income/transitional housing?

‘I agree the vast majority are small investors, or new to passive investments.  

The benefit here is that I cannot get behind on taxes and if I fall on hard times and my buildings are empty, my rent payment is based on my income, so I guess that is attractive.

.- My Goal: to have $10k/months of income to replace my day job.

The advantage if needed by calling it an investment home is that you can use the potential income from the property to help your debt to income ratio where you cannot do this on a second home.