Your analysis only  erodes one side of that assumption without acknowledging the fact that midwest properties will appreciate.  

At the end of the day he signed the lease which means he acknowledge everything stated within it.

RECEIPT OF AGREEMENT: The undersigned have read, understand and agree to abide, to the best of their ability, to this Agreement and hereby acknowledge receipt of a copy of this Rental Agreement.

To me, $100k is a lot of money and I would appreciate a PM that could acknowledge that .   

Presently, as part of the lease signing process, I ensure to thoroughly explain this clause to new tenants and obtain their initials for acknowledgment.

So if there is a slump in their pipeline there will likely be reduced sales volume of some level and they should acknowledge that and provide a description of how they can survive that, not say sales will just stay up from somewhere else.

[What you're looking for is an acknowledgment that there will be changes from a standard long-term rental renovation.]Will house hacking limit my location choices?

Ha.Now I have a clause where they acknowledge that if they don't carry proper insurance they shoulder the burden of loss, etc.

The Cap Rate equation,  which relies on net income rather than net cash flow, does not take into account the amount of leverage used in the purchase nor does it factor in the cost of the financed capital (meaning that  it fails to acknowledge the effects of your mortgage and the  subsequent payments).If you are concerned with cash flow, the better metric to use would be "cash on cash returns." 

Banks acknowledge that a rental business can show a taxable loss yet still be cash-flow positive.For Income - Banks normally take take 75% of your gross rental incomeFor expenses - they normally back out depreciation and other items that could be considered one-time expenses(etc repairs).