So if you refinanced at 80%, you'd still have a decent balance of the line of credit remaining, and it would still be a negative cash flow property.We may get experts on the Seattle market to chime in with their knowledge, I know the appreciation play is a lot more popular there than elsewhere. 

I'll play Devil's advocate.....why only California?

Then I’m Adding an adu in the next coming months with my cash as a value add play.

If the investor you spoke of had done so, not only would they have been aware of the underlying debt, they also could have requested the seller give the current lender authorization to share information with the investor. 

I was interested in the long term rental play with this duplex in addition to house hacking to improve my balance sheet now.

Instead of getting classified for the entire property, they went down to the local housing authority and talked to the manager about their units and left handouts about their properties that was marketed around helping section 8 elderly folks.

Here, title holder cannot waive, as the appropriate regulation is directed at the taxing authority, not the title holder.

I want to try and learn every part of the process and play it out in my head so I am better prepared.

.:)  The real answer is to prevent churning or constant refinances in an appreciating market because the secondary mortgage market is built on mortgage backed securities and lenders would have to pay their yield spread back to the investors if the loans kept coming out of the security.You can go with a DSCR loan that doesn't require 6 months seasoning, but the terms are not as favorable as they would be if you waited and since you're playing the long game with the property, it's best that you wait.80% is available, but again, the terms are not nearly as favorable as they would be at even 75%. 

The two items that are generally at play are the GPM flow and the lead content in any fittings attached to potable uses.