I can see how a young couple or someone with poor credit or not enough money for a traditional mortgage may want this option.  

If you can't do traditional financing (which is always the best first choice, so Homestyle which is conventional, etc.), then you want a hard money lender that is for 6 months, maybe a year max.  

The tenants would require 60- and 90- notices to move out, traditional renters and section 8, respectively.

If I follow this, you are saying he just makes traditional purchases - X% down and a typical mortgage?

I do the same thing with my properties, especially if traditional financing is involved.  

Looking at the numbers, with me living in one of the unit and renting out the other using traditional rental methods, I figure that I could get maybe a 800/850 per month in rent, which would barely pay my mortgage, let alone any of my expenses. 

Or are there other ways to finance my first multi family property outside the traditional banks?

You have the benefit of doing this the traditional way and with the great wealth of information, knowledge, and support on BiggerPockets.I'm juggling real estate with a full time job I love, I'm sure you can balance the two as well.  

If you have really poor credit, you won't be able to use traditional financing, but if you have enough experience, you may be able to get a hard money loan. 

Start with traditional financing.