I didn’t respond to your negative post to win an argument—I replied to encourage him and others not to give up on a dream just because one person may feel it’s not achievable.Listen, have you ever considered that maybe you and even a few others may be wrong?

Agreed, and in many cases, insurance is destroying cash flow if not pushing it into negative territory. 

Granted it is unlikely to result in a home run, but it also is less likely to fail big and negatively affect prospects for years. 

Also, focus on 2 years of job/income stability.Class D Properties:Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciationVacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions.

For clarity, as i understand the concept of reinvesting in the business, each "Bucket" should eventually fund itself without the need for cash injections or contributions.

Does their concept work? 

If I take out $200k, that property  will have a negative cash flow of $500, but the overall portfolio will still cash flow positive and I’ll have capital for another purchase.

The negative equity position is one reason (there are many reasons) why adding an ADU is one of the worse RE investments.  

Would this large amount not negate any potential savings you would have over the course of the next few years?

Doing a LTR would likely be a negative cash flow.