You and your wife should both already have substantial incomes, yet your net worth is completely upside down because you're not in control of your spending.You and your wife are not willing to house hack.  

your saying the property is worth substantially more than that so it should not have an issue appraising for your FHA 203k  correct.so simply write a contract for 391k with seller paying the lien out of their proceeds you get a loan for 391k plus 50k or 441k  and off you go.. every one gets what they have negotiated for.I don't see this as any more complicated than that.. other than your making it seem complicated liens are paid off from sellers proceeds all the time..

There must be five or six now.Part of the strategy on claiming CCA will depend on how you hold the property (i.e. directly in your name or via a corporation) and your planned length of hold.When you hold property in your own name, the CCA recapture upon disposition can hurdle you into another, sometimes substantially, higher tax bracket {BTW:  The recapture has an inclusion rate, in your income, of 100%; it is not taxed at 100% ;-) }.  

Borrower shall not commit waste or destroy, damage or substantially change the Property or allow the Property to deteriorate, reasonable wear and tear excepted.

There isnt substantial employment within a 30 minute drive.

Our goal in real estate investing is to gain a substantial amount of passive income to allow us to work fewer hours at our jobs and more hours together doing the things we love. 

Is it just cosmetics like paint and carpet or something more substantial?

You'll find that many often require substantial fees in addition to your monthly payment in order to finance projects outside of their normal scope.

Is it true that you receive substantially more rent than the normal market?

Both eventually declared BK and I was out the loan and attorney fees which were substantial.