I have been passively looking at the small multifamily homes for a house hack, but the biggest hurdle is finding one in an area we both are comfortable to live. 

You will get this biggest bang for your buck using this approach than putting down 20% OOS.  

The biggest question in doing the deal is there is currently a tenant who is under section 8 housing.

You should also look at the downside and have capital reserves should any problems arise in this property.

The only downside is that it would leave the only "living" space to the 12x15 area right off the front door that will be open to the kitchen.

It requires maintenance, especially on that tax front since taxes are one of the biggest, if not the biggest, expenses.

I've had numerous people come out and give their thoughts on how to work around the location and ventilation issue, but they all come back to the same issue: the balcony is the biggest ventilation impediment.

As a new RE investor, I don't really have the proper tools to analyze this decision, other than thinking that the potential upside of renting is small compared to the potential downsides of a RE crash, future vacancy between tenants, falling rental prices, falling home prices, etc.

As far as I can tell, the biggest commercial RE that are doing fine are the following:1.

I just sent you a PM.The biggest challenge is this market is the low inventory fueled by a large demand in the region from retail buyers.