My landlord owes $350,000 on a 2 bedroom townhome in the Bay Area (estimated value $830,000).Based on my current downpayment, and ideal monthly payment, my lender has pre-approved me for $700,000 at this time.

Get pre-approved with a lender first sir.

I analyzed a different potiential deal but this time sent it to a HML they liked the deal and pre-approved me.

Treat the mother and boyfriend as totally separate unauthorized occupants and let them know your process for getting them approved, or to vacate.Then document all your attempts to get in contact with the daughter and collect her rent.

I know switching a single family into a legal multi unit can be awfully difficult to get approval for- I wasn't sure if it was the same for adding units to an already existing multi.

Like @Nicholas L. said, I can probably find a way to get approved for another loan with a down payment but I am then going to have 700-900k in debt on my two properties.  

I called my local credit union and was pre-approved for a 15-year fixed, no points at the 2.8%.

So why is it I am readily approved for a loan on a residence for $500,000 but am having difficulty finding funding for $500,000 for the 8plex, which is providing income rather than taking it away?

Tenant asked owner if they could paint, which owner approved verbally.

We have not applied to be, and therefore are not approved as a Section 8 housing option.