Consider who your target market is, what are the norms of that market, then if there are aspects that you want to avoid you'll need to provide contractual covenants to manage those undesired aspects which are legal.

It's possible that the configuration of the lots makes it difficult or undesirable to build what the HOA requires on those lots -- or is difficult to adhere to HOA covenants while still adhering to zoning rules. 

In fact, not even sure it makes sense here...For example, 1 bed/1bath is a very limited market to work with which means you can have a struggle trying to move it forward and  the hoa alone  is super high, just these 2 factors alone are undesirable. 

It isn't easy to find extra money for a down payment, at this point and so it kind of leaves us in an undesireable spot to be in.

All of these things are experiences to me, both good and bad, desirable and undesirable, but experiences nonetheless.

If you want stable rents with little upside it could work out but if the market turns then the slower job growth area could turn into an undesirable area. 

Just as a penny stock can be delisted and become unmarketable and virtually worthless, your $50K duplex can become unmarketable, uninsurable, in-underwritable and completely undesirable. 

That said, if all you follow is the numbers you will end up with junk properties in undesirable areas.

The sellers fear is if the home were to have severe damage and the insurance would cover the damage and replace roof and kitchen then they would be locked into a undesirable contract and now the home is worth more.

Either you aren't doing many deals or you are acquiring property in a very undesirable area (country, desert, swamp land).