The core principles in The Book on Rental Property Investing still hold up, but higher interest rates definitely change the game.

For C/C- neighborhoods you usually need to scale to 10+ doors; it's a numbers game. 

Spoke with multiple credit unions and they mentioned a rental property needs to show at least two years of rental income in order for that income to be counted into the DTI ratio. 

My resources and skin in the game is being allocated to the remaining balance of X purchase price.What path do you recommend in this scenario? 

I am on it, but the sellers are not flexible, and they are ahead in this STR game.

However, at the closing table, we discovered it was zoned as a two-family residence.

If you are investing for the long game, I say go for it - we have to be creative in this market to make things pencil. 

I'd focus on deciding what you want to do (flip-high risk, but potentially high return...or large loss; short term rental-more work, but higher return than long term rental; long term rental-less work than the other two, but lower return).Once you've decided which you want to do, then focus on getting the best house to meet your goal. 

The game plan would be to keep this structure for 1-2 years with future full sale.

Would be great to reconfigure the lot lines on the two additional parcels so they'd both meet the minimum to build.