Maybe this is a good lesson for all new investors who have seen only one UP market to know that real estate doesn't always go up. 

Assuming on unforeseen costs that I am unaware of, it generates over 25k of income (25,079) monthly expenses 14,254 and the cashflow is 10,824- I know enough to know that those numbers are sound and the market doesn't seem to have high turnover.  

The IRS doesn’t care how you financed the property, just that you’re properly reporting your income and deductions.There are IRS guidelines for your situation - try searching around google or talk to a CPA

It doesn't require the tenant to acknowledge the notice or be present for you to enter.I'm with @Victor N. on this one.

,Most of HML doesn't have prepayment penalty , does that mean i can refinance to a traditional loan after all repairs are done ?

@Jimmy O'Connor something doesn't add up.

Then I went to "cash flow" which is similar to Buy & Hold except instead of buying a property and putting a renter in and getting 1st month's rent, & deposit and hoping the house doesn't get torn up or have a vacancy, I put in Tenant Buyers who give me $20k to $25k down on a Lease Option.

It appears having the owner carry back a portion of the note is still considered debt (obviously), so this doesn't help out the debt/income issue we were running into.

With my partner, we have about 16k in cash total which doesn't leave me in a comfortable spot.

That's either an overlay or a LO that doesn't know his guidelines.From FannieMae.com direct: