If you are friendly, but professional, you avoid putting yourself in that position.

I have had a positive experience so far and I am looking to continue down this path and grow my portfolio this year by having my second deal be a owner-occupied 2-4 unit home. 

I'm fairly positive any time spent handling any aspect of your business goes towards the 750 hours.

If I compare the rental income to the PITI payment it's actually just positive, but with other expenses (water/sewer/trash and capex, calculated by using 8% of rents), it turns into ~$500 month coming out of my pocket.

The potential rent on th eproperty is too low to generate positive cash flow.

You are in a really good position with that amount of cash. 

I just started to cash flow positive last year after all my mortgages were paid off, but I have made multiple millions in appreciation.

You could refinance out of the 203k and take cash out assuming the equity position is there at the end.  

Therefore, I believe I should be in a position to leverage up my balance sheet, grow my real estate portfolio and generate more passive income.

They make a little over 3x rent, have a small dog, and had positive reviews from prior landlords.