Im a firm believer in house hacking (if i had a family or needed more space) but if you are single and good with renting a room, I would consider an alternative.I would continue renting the room from your friend (assuming the rent and living situation are a good fit for you), and THEN buy the Multi (duplex, quad) or what ever else you can afford.Renting a room from friends keeps your living expenses WAY down, gives you much more flexibility, allows you to live independently and away from your tenants, and allows you to maximize your investment returns on a your up and coming real estate empire.

To consider an extreme example:What if you made money every month, but knew that next month you'd have to pay $10M in taxes? 

Personally I would never consider an asset without equity and even in second position with equity your position can be jeopardized if you are not careful.

In the event you try to evict a tenant with no-fault they are entitled to a relocation fee:https://hcidla.lacity.org/Relo...If the price is right and the location makes sense, I’d be willing to consider an ‘as is’ purchase. 

And only after that as third layer of defense you may want to consider an LLC.

The overwhelming majority of PMs are not going to consider an arbitrage arrangement for liability reasons, among others.  

You should consider an All-In-One loan for this (I see your comment about the cash out refi).

If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

It becomes subjective as to selecting alternative investments, but you can't really consider an insured CD unless you consider the costs of servicing and default expenses as well as reserves for losses.

It is time for people to look at ideas and issues instead of going in lockstep with one party or another.You wouldn't believe how many people just can't even CONSIDER an idea from the opposite party.