That could very well be the case then - just that they require we own it/make payments for 12 months.

Therefore, my monthly payment has now gone up by $1,000 which doesn't make sense to rent out anymore, as it will be at a significant cash flow loss.

The OLD rule only allowed you to leverage your cash and only put 3.5%-5% down payment on duplexes.

Increased floating-rate interest payments, coupled with climbing utilities and property taxes, have eroded profit margins and negatively affected debt service coverage ratios.As over $250 billion in multifamily loan debt matures in 2024 alone, owners and investors are bracing for a challenging deleveraging cycle.

Recourse or non-recourse? 

There are certainly non real estate options as well, especially in the public market where they are yielding 10% + if you are looking for cashflow..Be happy to chat if you like. 

I am currently house hacking in Seattle, and renting my vacant units out to lower my mortgage payment

Utilizing seller financing, we secured this promising single-family home for a purchase price of $106,000 with a $4,000 down payment.

Even if you create a non-CA LLC, if you are managing the business from California, you will likely be deemed to be "doing business" in California and therefore likely subject to CA taxes.

We are going to sell our house and use the proceeds to buy a rental but my wife is the one on the house and we want to put the rental in my name only. From a lender perspective would it still be considered a gift?