Are either of these workable ideas or should I be looking into pulling equity out of our current rental and going the conventional mortgage route or some other financing option?

Hey Sharma, if you know all the risks associated with buying RE and doing section 8 there, then by all means go for it.Lots of people are telling others to "go there" because the inventory is high and people need to get rid of it.As someone else mentioned, before you make any investments, go drive around and make a decision for yourself if you want to invest there.One last piece of advice: Don't just look at the numbers.

Based on that I'd recommend: buying an SFR with as little money down possible (3.5% FHA or low conventional) using the remainder of the money to build a JADU and an ADU (specialized ADU lender for the remaining amount needed to build the units).

Build a home and then purchase that product with a personal conventional or FHA loan? 

There are a few notable exceptions i.e. condos near the convention center, but that is the general rule in our market.

Hardy Money Refinance To Conventional How did you add value to the deal?

Quote from @Jacob Sherman: Anything under 100k is tough these days  Conventional, fha all reasonable but bank statement is rough. 150k is usually the lowest but they will do down to 75k with consideration.

You can buy a new primary home with 5% down with a Conventional mortgage, and the available equity in your home will more than cover that.

Most do, but there are some options out there and they will look fairly similar to conventional. 

If you have inventory in your area that require renovations, distressed homes, outdated and you can pick it up for a good deal.