The loan appraisal was reduced to $620,000 due to the needed roof.

If you hold the property you will reduce your tax burden, bonus deprecation, mortgage expense.  

We moved down to a doublewide in a park with 2 kids to reduce our total housing cost to $285/mo, including utilities. 

I didn't know that the taxes get reduced if you are an owner occupant.

By doing this, and assuming you have more money left over at the end of each month, this will help reduce your balance much faster and yet you will still have available capacity to use, for when you see that hot deal that you need to jump on. 

I saved almost $34k down payment by using the built in equity int the house and reduced my  out of pocket. 

@Kathy ZickenbergIt doesn't seem like your CPA is providing accurate advice.It doesn't matter much about the income tax rate of the state you plan to invest in.You live in CA which is a state with one of the higher tax rates.Furthermore, rental properties, will likely show a tax loss as a result of depreciation(not guaranteed, but likely).Good thing is that California is not a gross income state and they will allow you do reduce your taxable income from rental properties so long as you meet the AGI threshold(below $100,000 - $150,000 threshold).

Look for the pain and offer to reduce or remove it.Determine if your seller really is a seller, is ready to act now, has the ability to pass title.Assess if s/he is a starter, estate builder, or "ender".

If my wife and I form the LLC together, will that reduce some of the risk stated above re: the participation theory?

If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit.