From financial prospective it is better to buy a 4 Family house - this way you would live in it for Free while your tenants are paying your mortgage (you may even earn some extra income).

Monthly  cash flow will be $650Hopefully once property 2 is occupied ill have extra cash to fund property 1 and eventually get it rented out as well.

I usually take a more detailed approach to develop the high level estimate.  

These properties usually will not be sold for any type of real discount it seems.

There are various reasons the project may not qualify for financing:  owner occupancy percentage, one individual owns more than 10% of the units, the community is involved in some sort of litigation (usually construction defect), or the HOA finances are bad (underfunded reserves).  

This may not be feasible without more specifics on my taxes but perhaps a rough formula on how I could figure it out.My basic thought process with the math would be the following:For every extra $1.50 I make above $100k (but below $150k); I lose $0.75 I can write off.So here is where my knowledge really breaks down (if it hasn't already unbeknownst to me).So for every $0.75 I lose the ability to write off as a passive loss; will this cost me $0.75 or will it cost me $0.75 times my marginal tax bracket of 28%, which would be $0.75 x 0.28 = $0.21And if it cost me $0.21 per $0.75 and therefore $0.41 per $1.5, that would basically bring my OT down from 1.5x base pay to roughly 1.1x base pay?

In Austin you usually need a lot with SF-3 zoning (duplex) to allow for a construction of the second unit, or ADU.

It's not fun and can cause a little extra work, but ultimately the LLC is the way to go.We now have 5 LLCs to hold different sections of the portfolio each has its own bank accounts, income statement balance sheet.

You have to check the zoning to make sure it allows for the extra units.

We also made sure it was extra clean when the next round of tenants came to see it and accomodated showings.With the exception of what Michaela said about accepting too much rent upfront, I wouldn't necessarily rule them out.