That is a great question Sneha and a legit concern.

I guess my biggest concern with have a primary residence is for tax purposes and being able to claim I live in the same state for my w2 job.

But putting $50k down on a property that cash flows $500/mon would yield a 12% improvement to your cash flow but will likely be better for your net worth.So if you’re someone who is already financially independent, you’re probably more concerned about net worth.However, if you’re someone who is trying to make it out of the rat race ASAP, you may be best off making decisions based on cash flow until you’re free from the rat race; then you can re-evaluate your goals!

Put you at ease or raise more concerns?

Hello,I am most concerned with the current landlord/tenant rights issues.Flipping properties is challenging enough without the unique limitations here in OR.Fyi - I am also free to start up my business in another state.

If so, is there anything I should be concerned about if I do this?

Mainly fire barriers, and extra insulation in between the floors. you could go with permits for the work that is being done if you want to avoid any concerns, but as far as the city will be concerned your home is just a single family that has a Mother-in-Law suite, and you are renting the spaces separately.

Even if she pays you off 3 months into the foreclosure, you are just better protected in the case that she doesn't pay.My biggest concern is that I'm in 2nd position and I was told the first one would be paid off and depending on how much would be left, would go towards me.  

With regards to the debt portion of your concerns, I would suggest you read Robert Kiyosaki's Rich Dad Poor Dad book.  

My main concern is just the lack of actual cash flow after all hard and soft expenses are built in.