I understand the goal is to work to continually increase your cashflow by acquiring more properties over time, and that annual rent increases will give you a natural boost, but I imagine you want some cushion built in to your spending habits for inevitable bad times economically?

The whole next-day delivery, work from home, instant gratification syndrome has dramatically changed the standard for this asset type.

If you can get a 4 unit and a basement, that would be ideal and create major cash flow and equity creation, plus you can not worry about a property manager and boost your yield.I see how institutionalized product in Class B/C markets are trading at 5%-6% cap rates.

Another point that no one has brought up is that you can quit your job a lot faster with arbitrage units - this is a big motivation for me as I actively dislike my current day job.Buying for appreciation could be a longer term play, but it’s not going to help you dramatically change  your employment situation in a short period of time.I would also like to add that I am pursuing arbitrage units in an area where single family homes can cost as much as 3 million dollars.

Does the tax return boost cover the $4200/yr loss?

Often times this dramatically reduces the issue with build time, as they are already under construction.

This is an exceptional market that is growing dramatically. 

It's boost by the Next Level Trails program (nice push by Eric Holcomb). 

The only question I'd be asking is will the taxes increase  dramatically  when its reclassified as 3 units.

Next thing you know you'll own four or five properties free and clear in no time.I'm not going to stop working (day job) until my rental income per month reaches a certain level... then I might move into wholesaling here and there to boost my existing income.