I want to put the smallest possible down payment down with an FHA loan on a multi unit.

How did you finance this deal?

Don't be so quick to indebt your paid off townhome until your learn creative financing and review all your options.

Where did you read that was possible?

But it is very much applicable to single family rental and residential units simply by getting bridge financing and a post transfer cash out refi.

Financing might be a challenge.I would recommend consulting with a attorney, loan officer, and CPA to discuss your specific situation and determine the best course of action. 

I think the ultimate situation for what I described above (not the plan, but a possible outcome) could look like this:Rent main house by the rooms while constructing ADU.

I’ve often seen 5 units sell for the same or less than 4 units because there are less buyers and the financing is worse.

Finding motivated sellers off market and making offers using creative finance strategy.

You make $10k from STR, you have to come up with $22k out of your pocket, not to mention the upfront $100k down payment and possibly another $20k to furnish the house unless you bought it as an existing STR.So in summary, in today's market, it's impossible to buy a STR and be a passive owner and still make enough profit to cover your mortgage payment.