The way this particular line of credit works, we had to prove $50,000 in liquidity and this allowed us to get access to a line of credit.

The less comparable a property is with nearby comparable, the more quests work is involved, but even with close comps difference can occur as to valuing adjustments.That being said, it would be advantageous for you to study the appraisal to see if you agree with the valuation.

It's set to a loud volume because he claims he has sleep apnea (sleeping disorder) and can show a doctor's letter to prove it. 

If audited, you have to prove that the payment did happen. 1099s is a separate issue which the IRS might raise in a audit but usually does not.

IF you do max out your own credit by buying SFH’s you can always move on to a syndicate at that point- Tax benefits and CoC - you get all of the same tax benefits between a SFH and a multifamily although the economies of scale may make a cost segregation study more economically viable with a larger asset- TLDR - safer leverage with direct RE, non-callable, possibly non-recourse, along with tax benefits - it’s pretty much the same with multifamily although given the diverse cash flows from multiple units I could argue that the leverage on a multi is safer. 

We have added a Large family room, bedroom, bathroom, storage room, laundry room, and sitting room/study (we homeschool sooo this was needed).

Can somebody who is not self employed, has a lot of equity, excellent credit, no debt and 30 thousand in savings but can only prove very little income because the majority of their income comes from tips, do a cash out refinance?

Also, Sheboygan has the most middle class households of any metro area in this study: https://www.pewresearch.org/fact-tank/2018/09/06/the-american-middle-class-is-stable-in-size-but-losing-ground-financially-to-upper-income-families/.Happy hunting!

to leave current job, secure financial freedom faster, bragging rights, prove something to ourselves or even others. 

The 3/4 tenants could prove to be an issue 8.