For instance I am in process right now in Portlandia  tough competitive market.. bought house right off of MLS system for 400k during the escrow period we were able to confirm 2 new lots  25X 100 each on each side of the existing home.. had to knock down a fence.. but by the time I closed i had the house which need about 5 to 7k in fluff and buff and 2 lots.

I would definitely model it with seasonality because you will need the reserves for the winter.

While I am house hacking in it, my cash flow would be -$354.61 per monthI do have enough savings to take care of the 5% down payment, closing costs, and water heater issues, with enough of a reserve left over for 4 months of full mortgage payments, just in case it takes a long time to screen a good tenant.

Certain areas require an owner to live in one of the units, check the CO to confirm. 

Or do we keep a reserve working capital account?

Could you confirm/deny my understanding of these rules?  

The issue with hard money is we have a decent amount of equity in properties but not liquid cash reserves to show.

Take advice, but confirm everything you are told.

You'll get my confirmation letter in the mail."2.

In addition, there is a monthly CapEx reserves budget I set after the property is stable.