What I really need to know is if seller financed homes count against the 10 limit max for conventional loans or they are excluded and this is just a rule by this bank.

@Matthew K. there are tax benefits to either strategy.If you've lived in your old house for 2 out of the last 5 years, you can exclude up to $250k ($500k if you're married) of the gain from your taxable income.If you use funds from a HELOC, you tap into the equity of your old home, pull out money tax free, and invest it.

Income is a protected status in DC so you cannot discriminate on income and exclude section 8 tenants. 

Would I be able to convert my 457 to a self directed IRA, excluding my Roth, or would I be unable to utilize the funds in the 457 entirely?  

Now I'm not a CPA or tax attorney so this is just my understanding, please consult with appropriate professionals but if you were to live in it as your primary residence than you should be exclude from long-term capital gains up to $500K  (for a couple) of profit when you go to sell it, not sure what your intention was on length of time that you two would live there or desire to sell it down the road.

If the house was excluded then really the home could go through as a normal sale if the home owner was interested in selling it.

Based on my estimation of costs, I calculate that my total costs excluding the mortgage payment is about 66% of the total rental income. 

. $9,450. 30-year fixed, Interest Rate: 5% Rental Income: $3,900 We will be living in one of the units, but for the sake of the analysis I am going to calculate both units as rental income and factor in my costs at the end.2 Unit: $1,600 + 3 Unit: $2,300 = $3,900/moTotal Expenses: $2,832 Operating Expenses: $1,434/moMortgage Expenses: $1,398/moResults Monthly Cash Flow: $1,067/moMy Unit’s Rent: - $1,600/moOur Cost of Living: -$533 / 2 house hackers = $266/mo.Biggerpockets Property Rental AnalysisIn conclusion, if this house hacking plan is accurate and realistic, I would cut my monthly living costs from $850/mo to $233 (excluding utilities), and would have purchased my first rental property.

Not excluding, wholesale or other options of purchasing or acquiring the property.

.- THE BIGGEST ONE: underestimating or completely excluding vacancy and maintenance reserves.