Personally, I like option #3, but everyone's situation is different. Multis tend to require a higher up-front investment. Also, good multis are sought by many investors, so the market is crowded with people who run the numbers.
It appears you definitely want to do a flip. So why not go with the lower bar for entry? If you can manage that, you know you can do it again with a multi.
I agree that #3 would be the best option. Look into whether there'd be a tax advantage, as well.
I like #3 as well.
My wife and I did option #1 back in 2006, except we held onto the home and now rent it out. That worked out well enough. But, if I could do it all over again, I would have bought a duplex or even a fourplex, lived in one unit and rent out the others. By living in the property, you can get an FHA loan. Today, it is possible to get 30 year mortgages at 3-4%. A mortgage like that on a duplex or fourplex would be sweet.
I also vote for #3. If you can find a nice multi-family that will work for your family, go for it. It is low-risk and a good first step into Real Estate. You get the benefit of a low down payment and a great rate because you are going to occupy one of the units. That being said, a typical duplex or 4-plex has 2 bed, 1 bath units that aren't suitable for a family usually. So you might look at older houses that have been broken up into a number units or a situation like a house and cottage in the backyard that you could rent out.
If you wife doesn't agree to that strategy, I have been able to get started by buying "cheap" run-down houses, renovating, refinancing and turning them over to a property manager. By the end of the process you have very little or no money left in the property and you can go and do the next one.
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