This is not a straight forward answer, it's a personal opinion/choice.

Although I will say, I have had a hard time grasping the concept of skipping the 4-doors, and going straight into 16 units. 

Run the analysis and you will know whether to offer BPO straight away or something else.

I see there's potentially a lot of money non performing notes but don't want to jump straight into that. 

Since you are new on the investing side, he'll be taking on more risk and will probably want a bigger reward.You could do a straight lending relationship.

But now my current tenant is leaving and listing at $1600/month and with a vacancy not until April, getting multiple people interested, so the extra $200 a month goes straight to CapEx/etc and will help alot and would make those cash flow calculators more happy.  

Previous landlords may not be straight up with you especially if they are trying to get the tenant out of the place they are now.  

Thank you John, good to here that it was pretty straight forward for you. 

More to come when I have a straight answer.  

The foreseeable problems with any of these 3 options, as opposed to purchasing with straight cash are:  1) the seller might not want two people coming through, bothering tenants 2) he might shudder at the sound of paperwork and complications from creative financing or institutional lending and back away entirely.