Any suggestions for creative ways to get around putting the entire 20% down or other ways to cut costs in an internal deal? 

While it's great to own property in San Diego, I may just have to cut my losses and look elsewhere.

2-4 dumpsters for 3 bed house W /1 garage clean out Dumpster- $350x 4 = $1400 Labor $350 daily( 3 people) x 2 days= $1050 TOTAL $24503 days labor=$2800 We can fill 1 dumpster in one day so we might be able to cut 1 day of labor down-)

He cut me off and said "yeah F Off".   

No cutting utilities or any shenanigans like that. 

But getting into the house hack as soon as possible is also important in cutting your expenses.I vote for using your FHA loan on the multi-family rather than a single-family (preferring strategy 2 over strategy 3).

@David Coughlin Old homes are great to cut your teeth on, given you have enough liquidity and go in knowing extra repairs can happen. 

Who knows when the next pinhole leak will happen and if you have one with a renter here, they're not as forgiving or as understanding when you have to cut up some of the slab or take out the entire ceiling of a bathroom.

We see lots of price cuts and homes sitting longer and longer on the market

If grandpa can offer you owner financing, or a price cut, and the market there is pretty strong, you should consider buying his house.That said, the Seattle market in here is a pretty strong rental market.