The experience of the housing provider is going to be the real challenge to getting you a set of keys to move in with...they have to qualify, pass inspection, sign a bunch of paperwork, and finally lease up and send everything into LMH. 

Challenges?

On the surface, it appears to be a straightforward role, but it becomes far more challenging when faced with issues like non-paying tenants requiring eviction or broken systems that haven't been properly followed.As a self-managing property owner, it is absolutely doable—but success depends on treating it like a business.

@Philip Jones we've helped our clients do over a hundred.As some of the lenders posting have pointed out, the challenges are:1) Property value and corresponding loan size2) Appraisals have much better comparables than 5 years ago, but may still be an issue.3) Property condition can be an issue via the appraisal4) Ownership seasoning - most lenders looking for 6+ months or incredible documentation for cost of improvements made.5) Most DSR lenders require professional property management.Always try a small local bank or credit union, but most will expect you to transfer your business bank accounts over to them. 

I’ve challenged them to read “Rich Dad, Poor Dad.”

Challenges?

Selling now avoids capital gains tax and lets you reinvest into a new primary home and a solid rental property, which feels like the safer play given the cash flow challenges and ARM timeline.

Maybe they know the owners or were able to get the owners to let them see the inside.The process would be significantly improved if there was an expiration time for the owners to become current on the tax debt. 

. ✨ looking for ideas on to  how to acquire an owner-occupied property  with 5% down by using a mortgage loan product to purchase , improve and  avoid mortgage insurance based on projected value?

It depends on the neighborhood and maybe even what improvements that hypothetical home built in the 1970s got.