The bank might be nice up to a point but if they find funny business going on then all hats are off.You need an attorney for direction not info on this forum.No legal advice given. 

The nice part with conventional financing is that it allows you to purchase more with your cash.

I also get the tenants approval ( actually required by the lease, but nice to get tenant's okay) to show the house. 

Realizing this RE will have huge negative cash flow, how confident are you of market appreciation (property and rent) in excess of the negative cash flow as no one invests with a plan that shows them losing money on the investment.Final thing to consider is your likelihood of coming back to San Diego and how nice a home is it for you and your family. 

I want to have a nice financial cushion on my first investment.

The people that are owed the $40k are "not being nice" and are trying to force them out of the house or pay rent. 

You're right, it'll be tough to estimate exactly what the impact would be here in that neighborhood of NJ, but it's nice to hear what happened with other rentals.

I have always been "frugal" with my money; although I don't need to have a job, it's nice to pursue doing things that I love doing.

Reasons such as that has made me a little more exploratory on building my next MF, I happen to have a nice piece of land picked out :) I think @Michael Seeker has a great point too about the profile of the investor(s).

So the township called me yesterday and had a nice chat.