I see people without capital being encouraged to increase their credit card limits to incur  $20 -40k debt which they are told they’ll “earn back” in the first one or two deals they do.  

If your new LLC is a disregarded entity (single-member or owned solely by you and your spouse in a community property state), it won’t trigger a taxable event, and you’ll continue reporting income on your personal return.

Depending on your debt to income, you might have to sell or have an executed lease to secure financing to buy the second home.

I would not offer furnished rentals in lower income areas. 

Throughout the year I come across situations where people need to sell there home due to a variety or reasons, job loss, income loss, health, divorce, etc.

If you’re holding onto tasks that someone else could do better, faster, and cheaper, you’re limiting your income potential.Discussion: What’s One Area of Your Real Estate Business You Need to Let Go of?

Go straight into focusing on creative finance, subject to, and minimal cash down deals and build from there.I want to hear your thoughts on what direction to take here if you were in my shoes given these constraints (full time job and a few thousand saved) and you want to optimize for passive income first, then value appreciation?

The majority of my income comes from my rental portfolio.

Even with that, I can't promise you won't have major issues and possibly lose the property or your monthly income. 

The liability coverage is way better, the building coverage is often better, and commercial policies typically cover loss of business income as well, which a homeowners policy isn't going to help you with.California + wildfire area + STR is super tough.