A tip I can give towards this is working with a bank that is local to your investment market, as well as one that allows you to count your potential rental revenue towards your approval (for multifamily). 

I personally would invest maybe $400,000 to go ahead and purchase two multi families(preferably quads) at the $800,000 pricepoint.Sit on the $130,000 as reserves just incase you need to fix up anything in the house.Consider putting some of your future cash-flow into 529 plans for when your children plan to attend college.You should be eligible for social security in 10-15 yearsYou can also start out taking money from your 457 planAll in all, if everything is nice and dandy, you should be able to factor in $15,000 a month in gross revenue from your pension, social security, rental income, 457 account distributions.Best of luck

You essentially bought this deal at the bottom of the market back in 2010 and it still only cash flows $100/month.

Essentially I was just hoping the appraiser wouldn’t put the appraisal in the $800K-$900K range.

You would disturb the tenant's right to quite enjoyment by renovating the house and then you would essentially change the terms of their lease by adding another roommate to share the kitchen, bathroom, living room, parking, etc.

I could imagine a scenario where taxes owed could exceed cashflow if this is the case, but that doesn’t seem right 🤔 example:Gross STR revenue = $100kAnnual principal only pmts = 60KOperating expenses = 20KNet Cashflow = 20Kdo I owe taxes on only my cashflow of 20k, or do I owe on my combined cashflow + principal pay down of 80K?

Essentially the FHA underwriter will ask for a copy of the leases to verify that you can move into the property under those requirements.You can absolutely accomplish this and the tenant does not have to move out before closing.

Frankly I am surprised that they haven't been going crazy enforcing the laws already.I know people will say that they don't enforce the criminal code in the greater LA area, but that costs money.Enforcing STR laws could be a pretty big revenue stream and I expect they will catch on pretty quick.

Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month.

The only thing that matters really is if the numbers work as you are essentially financing 100% of the deal.