This is probably the game I've played most, out of all my games. It never gets old to me.
I know some recommend not going into the two story house to prevent Dr. Salvador (chainsaw dude) from spawning. However, I don't think that's a good idea, because he drops a good amount of money, which will be valuable later in the game.
Anyway, head into the two story house on the left as you approach, but don't bother attacking anyone yet. After the cut scene, immediately push the dresser toward the door to buy you some time as you collect the handgun ammo opposite the two barrels behind the stairs. Don't bother breaking the barrels now, they just have money. After you survive this encounter, you'll have as much time as you need to thoroughly search the area.
Head upstairs and grab the shotgun and the grenade in the dresser. Use your knife to break the glass (you should use it to break barrels, boxes, locks, etc., as it saves ammo). Now run toward the bed and grab the shotgun shells, then knock down the ladder for good measure. Head back and jump through the window that is by the dresser where you got the grenade. Head toward the chimney and grab more handgun ammo. Head back and go around the corner by the ladder outside. Follow it around until you're on the roof by the spinel. Make your stand here.
I find using the handgun sufficient until Dr. Salvador comes. If you get a head shot on a villager, immediately run up and hit the button to kick. It will take down anyone around you and is very powerful. If you shoot them in the legs to get them to kneel down, you can do a different type of kick. When you begin to get overwhelmed, use the shotgun, but make sure not to use it until your enemies are close or someone is about to throw a sickle. The shotgun (until tuned up all the way) is not very effective at a distance. Remember to switch back to the handgun when you don't need the shotgun. You should try to remember to switch weapons as often as needed. Keep in mind that handgun ammo is the most plentiful when you try to weigh which ammo you'd rather spend.
The key in this game is trying to find spots where they can't surround and inundate you from all sides. You can't always do this, but make sure you keep moving if you see you're about to get surrounded.