I had never heard of "house hacking" before, but it was mentioned in the first episode I listened to, and knowing that was already the strategy in my head, I figured I need to learn all I can about this approach!

I'm considering approaching the lender about a deed-in-lieu-of-foreclosure, given the 7-figure difference between appraised value/loan balance, I'm hoping that would be a solid last resort.Keen to hear if anyone has been through a similar situation and whether there's any other creative solutions I should consider. 

A more traditional approach is the only way I can see getting closer to that 80% LTV.

One of the challenges that keeps many boarded up properties that way, is that the cost of work required would be prohibitive because it might be more then an investor would be willing to be invested into the property. 

It's easier to approach the owner and let them know what you would like to do instead of going behind their back and getting into a legal mess.

If the latter, how would you approach an increase like that to someone you know on more than just a professional level?

It goes without saying that the flips need to work but i strongly agree with this approach, especially in today's market.  

I'm sure I could find creative financing, but seems pretty challenging as a first investment when average property price is $300k+ for single family.

Liquidity management will be your (and everyone's) biggest challenge.

Never heard of a tenant actually getting a judgment for anything approaching $2M....usually judgments are for mishandling deposits.