As for holding properties under an LLC, there are definitely pros and cons—it can offer liability protection and tax benefits, but it also comes with additional costs and paperwork, so it really depends on your goals and risk tolerance. 

This is a way to state the rules are in reality the loser of the two.in your case it does not matter because your proposal would put you at 5 units which does not qualify for f/f non commercial financing.  

I’m considering buying a plot of land in the Cleveland area and getting a manufactured home (duplex if I could find the right zoning) put onto a permanent foundation to use as a long term rental. 

If you're lucky enough to get a free and clear property where the seller is willing to finance, this reduces much of the risk associated with seller-finance.I would make sure the title is then moved over to your name, especially since there is not a risk of a due-on-sale clause being triggered.

If not, all I see is risk with no reward.

Especially since we try to obtain “equity like” returns on these higher risk, more active note investments.  

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

The intent of allowing some sophisticated investors was to allow people who fully understood the risks of what they are getting into.  

Businesses could use to only put a fraction of the lease as an obligation.

HMLs are a higher risk loan product that are meant for experienced investors although many will still lend to new investors.