- Do we not even consider pulling the equity and just continue to build our savings for the down payment?

You only talked about equity and a HELOC, but do you have savings? 

I have continued investing in CA and TX.

Stop hanging out with your deadbeat buddies that spend all day drinking, talking sports, and otherwise wasting away.

Keep in mind I’m still talking about getting something 10-15 percent below market value, just not the 30 plus percent below you need to do in order to make this work.

Kitchens, bathrooms, plumbing and electrical is already set up and you just have to have the tradesman do the hookups, theoretically. to be honest my advice is to sell the lots you own and buy new. most lenders won't consider your basis in the land as equity, there Needs to be a new transaction created. at least from all the lenders I've seen. we talk to land owners every day in columbus that own land but it's unentitled and doesn't have any transaction recorded so the equity contribution that you are given credit for is vague. so if you sell your lots and 1031 into another one, in my opinion it's the best of both worlds. if you can'ts sell them, entitle them to get higher values and then 1031. talk to a zoning attorney. 

These factors would include the numbers of properties that can be managed efficiently; the amount of capital their acquisition consumes (which is function of their down payment and financing terms), the quality and durability of the income stream they produce both in times of inflation and recession, their fiscal independence from government subsidies, and the time one must spend puffing out fires in order to continue to function.

So, you can't really talk about the best neighborhood for house hacking because $700k won't get it done.

Hey Jerry, I’d love to connect and talk more about this.  

If he agrees to the lease then continues to do this, fine him and follow through on eviction proceedings if he doesn’t pay and cure the problem.