I understand everything that you are saying, and figured that was the was reason but at the same time you ( NOT YOU) can’t assume I’m going to commit mortgage fraud when in fact I am actually going to occupy the home.

Any reason(s), other than the one I mentioned?

Assuming you are already paying them reasonable rent and also your part of the expenses I would find a way to invest on your own.

Is there any reason the owner would be against it?

I assume you have never done anything like this before, so getting a bank to take a chance on you with so little equity in the deal is going to be next to impossible.There's  reasons you don't see a lot of new 4-plexes going up.

Madison is a super solid area for several reasons.   

I personally don't invest in MSP/STP for varying reasons but it is clear that the city agrees there is a housing issue. 

The room layout must be reasonable for a residential home.

Which is another reason I think giving away 70% of the profits for just the 25% down payment is unreasonable.

Maybe they owe you some money and don't want the confrontation.No matter the reason, it doesn't serve any purpose trying to guess what you'll find.