I've been surprised at properties that have passed conventional financing though...and even FHA....also, one could present 2 offers to seller--one for a cash offer and one for seller financing (at a higher price of course). 

Or like many small in businesses you raise cash from friends family and anyone else that knows loves and trusts you.The other thing I suggest is to make that $27,000 or $37000, or $50000 yourself over the next year. 

I have some brand new homes in Phoenix that cash flow with 25% down.

You are correct that putting 3.5% down on a fourplex likely won't cash flow after one year.

If structured well, this can be a great way to get started without much cash.

If your goal is to maximize cash flow, look for properties where you can live in one unit and rent the others at market rates.

You could simply offer them a small cash equivalent for the “interest” when you return their security deposit…rather than bothering to open an interest-bearing account, if you’re worried about it.

Alternatives include using a 1031 exchange to buy a new rental property or completing the exchange first and then doing a cash-out refinance to fund the ADU.

As a former business owner, there are times of the month where it seems that all the cash goes out at once.

The investor either gets a loan or buys the property in cash.