If you don't know how to evaluate a flip/rehab, then I don't think it's time for you to do it.

I would also evaluate your budget, to save and try to generate more income.

Perhaps I'm making this more complex than necessary but given the potential tax burden I'm trying to evaluate all possibilities - especially since the house is in an ideal location for my spouse and I to live there for a couple years.

To give you an idea of popular lender criteria, check out https://www.11capitalfinance.com/Click on "Product Sheet" and see all of the different options just on this sell sheet to understand where lenders are in the market today rather than 2008.DISCLOSURE: I am currently evaluating a sales relationship with this company.

Look up how to evaluate properties and deals and start doing the real math.

I've been looking to do my first out of state multifamily deal this year, and am curious to hear how others evaluate potential markets to look at. 

I would suggest that you tell your partner/joint venturer that you will do one deal/joint venture together and then evaluate the future of the partnership/joint venture. 

The business decision of whether to do that however hinges on there being equity above the 1st lien and other factors that you're likely used to evaluating.

We begun our search for multifamily and even got preapproved for a conventional mortgage loan in the 500s with 20% down, but as we continue to evaluate many of these properties and their cash flow, it seems like a high cost of entry, ownership with a low return/cash flow.

I don't know enough about evaluating a 6 unit to even know what to get it under contract for.