He claims to have 400k for downpayment (I have no reason to doubt that he does).

@Jeremy England i like your deal Jeremy, i would opt to make it uniform in baths and floors and you get two things, better refi value, and my own subjective opinion is a better tenant, if it bugs you it will bug people like you, and there's a bigger reason, you want this deal to be more liquid asap, so at any time a renter or outside buyer can buy it, it's an important exit option to have just in case 

This should be analyzed on a market-by-market basis because the reasons for rent growth and appreciation differ from market to market.Here's more info on Sacramento if you're interested:https://www.biggerpockets.com/forums/621/topics/590913-rent-growth-in-sacramento-is-triple-the-national-average

I use to have a guy that was very reasonable but he has moved on to other things. 

A note of caution however: please don't make a habit of trying to force the value/income side of the ledger by reason of unbridled optimism.eg.

With a short sale, the basic explanation of the process is that the homeowner contacts their lender and the lender reviews the homeowner’s specific situation (financials, hardship and reason they are seeking to sell the property, etc.).

Furthermore, the better platforms understand this quandary and are unwilling to support it.For both these reasons you might want to consider promoting your project directly yourself in combination with any work you may do with a crowdfunding platform that will list your deal.

If you are happy with the cashflow once you rent out the fourth unit, I vote HELOC and leverage for a few reasons:-You don't pay taxes on the equity you use from a HELOC-Closing costs are free-You get to keep the property and continue to appreciate.

I make sure I am fully aware of the market in that neighborhood I then look for reasons why market rates may not work and estimate the costs to improve the property to bring it to market-that repositioning opportunity is what I am after. 

Especially when you compare that to some FV calculations of investing that $400/month at a reasonable rate of return.Yea, it's annoying to earn 1.5-2% in a money market account or a CD ladder as you save up for the next down payment, but it's about having the cash on hand to be able to strike when you find that next deal.