This can be a difficult and slow process with limited capital so start it sooner, rather than later. 

I realize that I may be limiting myself to less desirable properties by not accepting a higher monthly mortgage.

Is your investor looking to be a limited partner in a fund/syndication?

We’d like to get a 3bd place (I work from home and there’s a chance we’ll have a second kid).Savings Rate –If we limit our housing expenses to $5k/month, I’m estimating that we’d be able to save approximately $80k (inclusive of retirement, college savings, and taxable) a year plus 100% of any bonus.As I said curious about anyone that has been in a similar position or more generally any thoughts on what you'd do in our position.

So far limited value added, plan to add kitchen, backsplash, paint and recarpet.

The land is zoned multifamily residential, so there is limited range for what can be done.

Primary residence gain is not taxable (to certain limits), so when you convert to investment property, you convert at a higher basis. 

Also, with this approach, if the place is a bit beyond your DTI limits, the lender can count 75% of the projected rent (per appraisal) to help you qualify.

I never could understand the tax aspect you still have to pay tax as you receive the payments its does not limit your tax liability. 

Again just looking for some insight on what you think the upper limit would be of what I can qualify for a primary residence duplex.