Loans are based off your net income if you are a sole proprietor like myself, so the more expenses I have, the less eligible income I will have for loan calculations.Does anyone know how small to large size companies get loans?

George - I think that the owners most likely to seller finance a portion of the sale are those that have owned their property for a LONG time (potentially looking for residual income) and owners than own their property either "free and clear" (without a mortgage/debt) as they have more flexibility.

Robert said it perfectly, compare the sqft and size of what your units living room to others on the market and see if it is similar.

You may get steady rent (or at least a portion of it will be steady) but you may end up with a problematic tenant. 

Helps me save money on my own housing and learn a ton about the business without burning through my cash on the first deal.What size was your small multi family?

SIMILAR means unit configuration, # of units, bed/bath count, relative unit size, garage/s, etc.

I cannot wrap my head around the cash out refinance portion of this situation despite my tireless efforts.

Usually a Land Loan is 50% of what exists- and you need a verbal nod from planning that septic, curbs, gutters, utilities, especially water, and the size of what you plan fits the neighborhood or general plan.A construction loan on land is a different thing.

Just wanted to check opinions if it's going to be too small or should I just do decent size 1 bedroom with living space.

@LeRoi De-Souza-  you are not able to use a FHA loan for a rental property purchase ....depending on the size of the  property ( 1-4 units ) - you should be able to get a conventional loan ....85% ltv  is possible for a  1 unit  rental purchase ...get  formally  pre approved so you can  get orgainzed and  prepared