However, it's interesting to hear that it would potentially be a poor investment.My main goal is to house hack a property that will pay for itself through rental income while I occupy a small portion of the property (e.g. the top floor of the second unit that I would build).I got a quote from "Giant Shipping Container" homes for $250k for a 2,000 sq foot, three story structure that may be a decent option for the second unit.Do you recommend I that I instead build a large addition onto the existing home to maximize potential rental income and simply design the addition to allow for a separate living space for my wife and I to feel like we have our own lives compared to the renters on the other side of the wall?

If your overall income is pushing the passive activity loss limitations threshhold, you could also put yourself into a scenario where that management fee is causing a passive loss that you are not able to take in the year the loss incurs.  

The turn key side was not able to buy, so losing money over all.

But, because of this, it's likely not able to be financed.

IANAL, but I assume we are hoping/praying that no one sues or dies during that day that it's not in the LLC.In places like Oakland or Berkeley with giant transfer taxes, there's some extra stuff you need to do that a lender and/or escrow officer local to you can talk about, to dodge that punitive transfer tax.There are endless threads already on BP about the possible, but very unlikely, consequences of doing this.

He told me he is not able to get the loan for construction because they want the whole acquistion costs paid in cash. 

No other lead at the moment other than 1 more application but he works under the table and not able to provide paperwork for income.

As far as time for establishing a buyers guide I can't speak to that as I'm not in your area, but as nice as it is to have a giant list you can do a lot with a small list of regular buyers with whom you've established a mutual trust.

Depending on neighborhood and other deal specific items, we're pricing deals for investors to make 20% to 35%.What's happened lately is that we're not able to make anything on MLS deals.  

I believe there is a local REI that meets the first Thursday of each month in the Camp Hill Giant, second floor and is hosted by @Christian Bors.