First, don't let the 1 year goal force you into accepting a bad deal...or rationalizing a bad deal onto a good one.Second, everyone has a different number for CF needed, depending on where they are in the timeline of their plan. 

You're rationalizing a bad deal.

You seem to be pinpointing all the positive points and ignoring the negative, or worse ...rationalizing them.However, if you think this is a good deal, and you're happy with the numbers, no matter how negative they really are, then go for it.I think you've been given a number of very good suggestions on how to make the attempt to get this into a Section 8 scenario, so I won't restate them.

I used to rationalize using carpet because it is 1/3 to 1/2 the cost, but not any more. 

@Bill Brandt - That's absolutely ridiculous -- but municipal officials can be very difficult and are not disposed to being reasonable, rational folks.

They try to use the same basic strategies, and if they don't work...they force it, and rationalize that it did work...just not as well as they "assumed" it would.They try to farm leads, instead of develop sources, and think that volume of leads = success.  

This too shall pass.Interestingly, this is exactly the reason that loan underwriters "stress test" the financials on properties and require things like a 1.3 Debt Service Coverage Ration and cash reserves.

I would suggest that you continue to keep your weaknesses in sight and make a conscious effort to analyze your deals from a rational POV.

I’m more concerned with long term wealth than immediate cash flow.Wanted to include my thoughts as it seems most of the responses are unanimously for 2 houses instead of 1 because everyone likes to repeat the old rationalization for a duplex over a single family without realizing the obvious drawbacks.Again, I’m spending in general and don’t know the specific numbers of the two options.

But many of this distressed situations have distressed sellers that do not think rationally (if they did then I don't imagine they would be living in a shell of a property).