Instead, they just stopped paying their mortgage and didn't receive a foreclosure notice for almost two years because they only had about $150K in equity.And when they finally reached out to bank to renegotiate payments, the bank worked with them because the bank could see the market was still plummeting and that they likely wouldn't be able to sell the house for $500K much less the difference of $600K.On the other hand, their neighbors would refinance when rates dropped but they never took out any equity over 20 years.

Right now I feel like I shot myself in the foot with a $35,000 income increase.I did finally talk to a lender today that seems to understand REI.

You also need to the resources to do the renovation and also qualify for the final loan.Another way would be to buy the MFH first, live in it, renovate one unit, move into the renovated unit, then renovate the other unit(s). 

The attorney requires a final payoff amount to the hard money lender.

Back to now, there is still a chance this current tenant might leave, she says she just doesn't know if she can finalize her purchase which makes me nervous because obviously i want to know if she is leaving or staying especially after she made me list the unit and go through all the work of finding a new tenant.

But after a few years of talking to her about it, I have finally convinced her to use the equity in her house to buy more real estate.

@Davit Gharibyan, The QI for your 1031 will have the final word. 

That said, I finally caught a break and have been presented with a unique opportunity and although I'm not overwhelmed yet (excited!)...

Fix any nails or rough edges though and give them a timeline.

I have to fill nail holes and paint/touch up walls.