Smokers and pet lovers will pay extra for this freedom.

There are things that they would be entitled to in terms of a price adjustment (in your example, if lumber prices skyrocketed for a specific reason beyond his control then usually the owner is on the hook, however, there are measures to limit this exposure).A contract can be drafted using the scope of work, estimate, and schedule (you can include liquidated damages - this is a sum (not a penalty) of what it would cost you if the project is not completed on time - think daily rent and storage rates). 

Keep in mind that they usually find additional damage once walls are opened up and that will cost more.

The payments for HELOCS are usually interest only and may or may not have a term of a number of years (e.g. 5-10 years).

That's strictly a cashflow mentality since he seldom assumed appreciation.Colorado is experiencing major appreciation, so you could lower your payback standards since your profits would come from appreciation.Finishing the basement: Assuming $15,000 to get an extra $250/month, that's a payback of 60 months or 5 years.

I moved into the single family home, and have the apartment out back rented and my old apartment at the 4 unit rented out, and those two extra income properties cash flows quite well while upgrading my living conditions from a 1 bedroom apt to a single family house.If you're trying to refi out of your FHA to use again, you would need to have at least 20% equity in that property to refi out of the FHA.I love your strategy and as long as you live in the FHA property for a year there is nothing illegal about it.

They are uneducated on real estate, so their advice is usually horrible and works against you. 

But I've been trying to justify house hacking, and without using an FHA loan (I'd rather not pay the extra insurance) I'm finding it hard to see the benefits.

I always watch out for the “money is no object” line because it usually means they don’t plan on paying. 

Once my emergency fund is set and my retirement contributions are maxed out, I will happily co-invest in my Funds because that'll be the best place to put my extra money.$100k is a reasonable investment for a JV for those that do that.