My wife and I currently own two rental properties and our primary residence.House 1: 4 bed 3 bath.

@Mary MunozIn Brandon and Heather Turner's book, The Book on Managing Rental Properties, they suggest giving applications to everyone who comes to look at the unit, even if you know they would never be able to qualify under your standards. 

Less rental appreciation potentialAny insight from people who have looked into or bought MFHs with all 1/1s would be great.

This page has some helpful resources. https://www.biggerpockets.com/blog/manage-your-rental-proper...

Also avoid certain types of rentals-the C and D class are more likely to have higher turnover costs as they attract a lower quality tenant.

Birmingham and Huntsville are very strong rental markets that provide good cash flow and appreciation.

The rental income loss cannot be included as income for last year (2018).   

The idea is to build multifamily rentals to hold for the long term.

A suggestion could be help them find temporary housing, such as a rental or a motel, and possibly cover the first month’s rent.

It sounds like you're growing your rental portfolio, so I suggest managing your properties like a business from the start.