If you're not looking to borrow a lot of money then maybe start out with mobile homes or like @Clayton Plank said, owner finance deals. 

Could you and your friend come up with the $65K in personal loans, maybe borrow against a 401K?    

Typically the borrower still can sell the house up until the Trustees sale. 

If you borrow off your 401k for a down payment on a owner occupied multifamily.

When I got the loan they indicated that I could not borrow against the home for the life of the loan since they are a non for profit agency that's sole purpose is to keep people in their homes without the possibility of them screwing it up by doing a cashout or heloc.

Plus, you can borrow money beyond the $35,000 threshold for Energy Efficiency Improvements (windows are a big one, heat pumps, etc).  

Rehab money held in escrow and paid as work is performed.Total that can be borrowed is limited to the FHA caps per each county.Not all lenders participate, so you have to ask around.31/43% DTI ratios for underwriting.In general, takes longer to close.

It just states that they've qualified me as a borrower and that any actual financing depends upon the value of the property, my downpayment, etc.  

Also  does the bank include the income the unit makes for part of the borrowers annual income?

So for borrower with limited income and down payment, FHA allows them to buy a property that otherwise they can't under a conventional loan.