And hopefully I can be financially independent by paying the mortgage down eventually.  

Ur rent mortgage rate is 6.75 and I have been paying mortgage for like 7-8 months.

If we include investments in mortgage loans (trust deeds), real estate partnerships, REITs as well as direct property ownership, I’m at about 80%.  

There is no UBIT because your investment isn't leveraged with a mortgage or debt.

I am wondering whether they are requesting the Court to repay the first mortgage although the auction stated it was subject to the first mortgage. 

Stating that they are using the mortgage of the investment property as a reason because it would put me above their threshold.

You do not want to lie on an application, that is mortgage fraud.

The strategy I'm following for my first house hack is to acquire a multifamily property (duplex, triplex, quadplex) or SFH w/ an ADU (or potential for an ADU) as I am mainly looking to simultaneously acquire my first property and subsidize my mortgage payment.

I really believe in my hometown and have a good grasp on it so up until now- I have simple bought whatever I could as soon as the bank would give me a mortgage.

Quote from @Erick Pena: A "good" rental property is one that covers all expenses (mortgage, taxes, insurance, maintenance, property management fees, and any other costs) and still leave a surplus (commonly referred to as cash flow).Calculate cash flow as: Cash Flow = Rental Income − Operating Expenses − DebtThere's much more to it, but that's the basic idea.