No equityOnce the bank forecloses they have that on their books counting against their reserves if there is no equity they may sit on it until market comes back.  

Of course this will greatly amplify the risk and reward side in point #1.3) In case everything does go to hell in a year you should make sure whatever you buy isn't a place you aren't counting the days to get the hell out of or stretch yourself way to thin getting into it.  

Do not forget to consider that it will take 6 months – 2 years before many lenders will consider your rental income as part of your actual income, and even then they will typically only count 75% of the rental income.

You can always check listsource.com for counts of particular properties without purchasing a list.

Are there any lenders or particular programs that will allow you to count rental income to help qualify for an owner-occupied multifamily property?

ME: So would that count as my second home?

@Michael Sato thanks I appreciate the help, any little help counts

Option periods are not counted by the lender because they are not set in stone and a renewal might not happen.

Value of 4 unit buildings is solely derived from the neighborhood comps and then adjusted for quality and room count. 

I know you can't count on appreciation but it's highly likely.2. do we put down 20% if we are living in it or try to use as little of our own money as possible?