PMI, sure, why not, i would try to include it in their payments, just like the banks do.

The best way to get money to buy another property is the down payment amount and appreciation you cannot count on.  

My initial plan is to get the extra cash I need for building more reserves and down payments by flipping/wholesaling, which I still want to do in order to speed things up.

My mother is behind on payments buying the adjacent property.

I could finance either property by not touching my current mortgage, using only my savings for down payment,  or I could refinance my current property and purchase 108k property outright.

Some background: my friend is a tenant who has been living rent-free in a unit for over ten years but is a professional painter and has been painting numerous properties/units for the landlord in lieu of rental payments.

I've had good luck with SmartMove for screening and online payment too.

As long as 75% of the rental income covers the mortgage payment (PITI), you are good.  

I don't have to put a down payment nor I will have to pay PMI and have a low interest (3.5%). 

Within the next month or two I'll have more than enough for an FHA down payment in my area on a property.