Considering most homes will not cash flow with 20% or less down, plan on 20% and most likely 25% down required - depending on the cash flow expectations. 

They did a great job.  

For instance, knowing the income limits, family size requirements, and the types of properties that qualify can help you make more strategic decisions.

Also, focus on 2 years of job/income stability.Class D Properties:Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciationVacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions.

It's a very expensive repair (ballpark $15,000) and the cost depends on how long the sewer line is.A lot of municipalities here require dye tests and occupancy inspections.

As you alluded to, sometimes a passive note investment purchased for monthly payments “goes south”, and becomes an active participation investment, with plenty of additional capital required for legal fees, forced place insurance, and property taxes.  

From what I've seen and read, most of the reason operators get in trouble is that there is some type of "event" that has occurred (usually their loan has matured or they've defaulted on their existing loan) and they need to refinance their loan and the lenders require a new appraisal to be done, which usually leads to a lower appraised value, and a lower loan amount, which "forces" the owner to pay down their debt.

Also, focus on 2 years of job/income stability.Class D Properties:Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciationVacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions.

Banks and credit unions might have lower-cost options, but they'll likely require more equity.

If you eventually convert the property to your primary residence and later sell it, the taxes would be prorated based on the ratio of time the property was investment property.These items should be addressed and discussed with your tax and legal counsel to ensure that the exchange is the best course of action given the restrictions and requirements.