We conservatively underwrite deals in MSA's that have job growth, population growth, and strong rental demands.

I've been playing fantasy league real estate investing as a way of understanding a market that I may enter soon. 

It doesn't come into play until you sell. 

You don't want rentals on the street you live on for an easy understanding of how effects actual value.Look in predominantly tenant occupied areas where it's accepted as the standard & rent drives demand not agent listed value. 

In my opinion 3 bed vs 2 bed demand has more to do with the mix supply in your subject properties area.

I, being me, would however play along and see what kind of convoluted crap he comes up with.....just for fun and education.

Is there no demand?

The odds of them trashing it on purpose are miniscule and I doubt they'll play nice if you walk through and point out problems while simultaneously telling them they have to move out.

I have been holding as the Phoenix market has been going up now at 2.3 months of supply left.However, I now have over a million dollars in rental assets, and I was wondering what my next play (multi, add bank leverage, acquire more) should be?

If you're in a high demand market, I'd recommended holding off for a better applicant.