Maybe your situation is different and if you don’t feel comfortable in the neighborhood then this may be a moot point anyway.As for FHA, my understanding is that you must intend to live in the house for a year  it sounds like you did intend to, but due to unexpected circumstances- lead exposure and unexpected unsafe neighborhood- you have to move.

Any tips on avoiding unexpected costs or delays during rehab?

My friend said his client nearly bailed when she found unexpected wiring issues behind the kitchen walls..apparantly the seller hadn’t touched that electrical since the Reagan era..but with a patient electrician who understood the local code and a carpenter who improvised a shelving trick in the diningrom, they ended up selling above asking.Flipping and building can get tricky, especially once you start thinking bigger.

Having cash reserves gave me the confidence to move quickly on a great deal without losing sleep over unexpected expenses.

Liquidity: If this is your first or second property, prioritizing liquidity (by cashing out now) might allow you to seize unexpected opportunities, especially if you’re actively prospecting deals.Since you don’t have a deal lined up yet, you might explore options to minimize the gap, like prequalifying potential deals or using short-term financing strategies to bridge the 4 months.Good luck growing your portfolio!

If a large repair or tax/insurance hike were to happen with a multi-unit than you at least have other units cash flowing (usually) which helps stabilize such unexpected costs. 

When we did it, we did score some great deals, but what we found was that we were visiting so many properties to understand our "strike price" (the maximimum we would pay for the property when taking into account rehab costs, hold times, interest on any debt, closing costs, real estate commissions, a contingency reserve for "unexpecteds", etc) that the math started to not make as much sense.

Were there any unexpected hurdles during the rehab or resale process?

Personally, I’ve decided to sell two properties out of my portfolio of 26 to address some unexpected expenses and other debts.I was hesitant at first because I didn’t want to let go of any properties.

A "neutral" cash flow property will likely wind up negative many months/years because there's always something unexpected!