If this isn't the case, it seems very odd to pay 50% over FMV for a property, even if the numbers do work out- and that means too I think that it's affordable?

This property was in our purchase price range that we could afford a 25% down payment.

The only way it works out is if you can get a lot more rent for her living space than she can afford. 

Despite the recent run in prices, the Austin metro area house is still affordable compared to many metros.

First, what can you afford.

Ideally, I would like to purchase a duplex or MF, live in one unit and rent the other(s) out.But then I had the idea, that since I'm already applying for a loan, why NOT purchase some affordable land and develop my own MF (Duplex or 4-plex) from the ground up!?

We don't pull their credit or charge them an app fee, but this will tell you how much they can afford to pay in rent, which will give you your options. 

I currently only have one two family rented, but will be buying either another double or something bigger if I could get financing or afford it with the cash I have. 

This could be an affordable housing killer for a town that really needs affordable housing.

I would gain less equity over two due to the increased cost, however, I can afford to purchase in this range using a zero down loan with no PMI.