Less risks of significant cash outlays and/or collections defaults.

@Brock Bernall As a rookie House hacking is the best for getting started has the lowest risk and best profit for a low down payment option.

Also, if I do need to request it, is there a risk that it would get rejected for reasons other than the place being unfit for it?

In the end it is about your risk tolerance. 

One of my recent failures was underestimating the importance of clarity in conversations with potential investors.

Positive SolutionsProblem: In my county small multi-family houses are nearly non-existent and short-term rentals and second-cooking-areas are illegal.Solution: House-hack while renting MTR to traveling medical professionalsProblem: I didn’t know the many laws of the countySolution: A hired attorney 1) informed me that the county calls a house-hack a boardinghouse and 2) drafted a very comprehensive agreement that includes answers to your list of questions.Problem: Interpersonal problems can be a risk.

Quote from @Levi Perl: The purpose of background screening is to determine a level of risk, and then you decide if you can mitigate that risk.How does a DUI conviction from three years ago impact the tenant's ability to pay rent or maintain the property?

So, you could potentially avoid paying income tax on all profits!

You'll have the same potential upside range wherever you do it - 10-40% are probably the outside ranges.

I would think that participating in a sub to deal as a principle poses an even higher risk.