As Pat mentioned you have a lot more flexibility with home 1 because it has no mortgage and is not owner occupied.

I was referring to Owner Occupied foreclosures in particular, when warning to stay away from foreclosures in certain states.I agree that door knocking would be the best way to get these deals down.

You can get a normal owner occupied home loan to do this. 

Hey Santosh,As of right now you're extremely exposed regarding insurance and I'm going to assume legally as well.If the home isn't registered as a legal multi-family with the town that's something you'll have to correct ASAP and make sure the home is up to code.Insurance wise as soon as they find out what you're doing they'll cancel you as the risk has changed from a single family owner occupied home to a multi family owner occupied home.

One for the second house and one for your primary residence on an owner occupied permit. 

@Steve Powers is correct that these were mostly originated as owner occupied loans.

Get into details on how renovations are done with units occupied, what systems they use to mitigate tenant fraud on applications, how they set price levels for the units?  

As always, some bad actors cause burdensome regulations for everyone else.Per the Akron Cleveland Association of Realtors:"For example, in Cleveland, a local agent in charge must be identified if the property is not owner-occupied.

Owner occ developments there is no value associated to the income approach so these props generally speaking will appreciate a lot more as the neighborhoods are much more desirable. builders the last thing they want to do is sell to investors if they are creating owner occupied communities.. rentals degrade the neighborhood and they will be sabotaging their own values to allow a bunch of investors to buy and rent out in their communities.So when you buy new builds keep in mind if its a build to rent community they will NOT appreciate like owner occupied neighborhoods.. might be best to find something already 3 to 5 years old where the stigma of renters dies down.. that would be best to protect your investment.

That said, there are specific contractors who like working with investors since they can avoid the hassle of working on occupied homes.