With a bigger down payment (25%) your cash flow will increase some.

I wanted to put this out there as a contest to ramp up responses and ideas for creative financing approaches to see who can help me in figuring how best to structure the deal to minimize my risk, increase learning opportunities during the process, and maximize returns in light of minimizing risk.

So you have increased your equity position and have more investable cash than you started with. 

Personally, I suspect the time to invest in multi family is behind us for now (wait till next recession) 5 or 6 % cap rates and you have work to do and taxes to pay doesn't sound that interesting when I can get near 5% yields on high yield muni bonds-no taxes and no work.Consider Kitsap county/Bremerton/port orchard for better deals though even there prices have increased meaningfully.

My understanding of the strategy is that you would find a good investment property, increase its value and stabilize it, and then refinance.Pulling out cash from your primary residence tax-free can be great, as long as you are getting a better return than the additional interest you are paying.

Escalation offer example below:SPECIAL STIPULATIONS: The following Special Stipulations, if conflicting with any exhibit, addendum, or preceding paragraph (including any changes thereto made by the parties), shall control:Buyer's purchase price offer is $x with $x Seller's Contribution at closing; however, if Seller receives one or more higher NET offers before this offer is accepted, then this offer is increased by $x above the other acceptable offer up to $x.

I can't represent myself because I don't have a license and I don't really want to increase the closing costs by introducing an agent to the mix.

When it's time to renew their lease, ask them what small upgrade you could make to their home to increase their quality of living.

Not in too bad of condition but definitely can be spruced up.What would you improve in this rental to add value and  increase rent just from looking at the photos?

If your deal needs rehab work and the value will be increased substantially then a short term loan would be ideal.