With negative cashflow, I wouldn’t bank on appreciation.

Hello,I have a long-distance rental home that is NOT in a good location and is worth less than my mortgage balance of $60,000. My listing agent suggested two options:1. Sell it to the investor for a bit below $40,000 ...

If I pulled out 70% of the ARV, the 2% rule is shot and I'm negative cash flow.

The margins are a little tighter but there should be no way your coming up negative. 

Case 2: I want to maximize my yield and build wealth as rapidly as I can, without taking crazy risk: In this case, you can refinance the properties, likely pulling out $100K+, and use that as the down payment on multiple additional properties, or larger multifamily properties in your area.This would increaese the effects of leverage on the portfolio (compounding returns positively in a growing economy and negatively in a recessionary environment), but over time be highly likely to build more wealth, faster, with some added stress and the need to more closely  manage operations in a much larger business that in initial years likely won't produce as much cash flow. 

Less than that and you are likely to lose money every month (negative cashflow).

One mistake many make is not taking into consideration the opportunity cost of paying rent elsewhere, and just see the property as negatively cash flowing. 

I was personally willing to eat the negative equity associated with adding an ADU to my So Cal home, but the thing that stopped me was the prospect of having a tenant live on the same property.

I don't know what type of backgrounds some of those large companies l typically like to pull from, but wouldn't think engineering (with it's analytical nature and work ethic that typically are associated with this background) would be a negative. 

Johnathan - thank you for the  outline and posts --Using a VA  loan is this a good move move as this will be  the only option that allows  zero down  payment --A  future future loan application for a new  primary home will likely be  affected  ...depending on  when you  buy the next property - any lender  will likely use your  schedule E  from tax returns to determine the  negative or  positive  rental income  you  will use for  qualifying purposes  ....also if you move out of one of the  4 units , you will  have  some additional income from this  unit that may be  counted - what are the  projected  rental income per unit  you are using in your estimations  ?