I informed the seller that because of the overlay, the property may be 2 build eligible in-spite its small lot size.

Conventional financing will also require that you qualify using employment history, income and DTI.

Your strategy takes advantage of your employment cash flow and ability to control discretionary spending.  

A proper vetting process - background, employment, credit, and reference checks - will weed out 99% of problem tenants. 

I am planning to self manage as well and since there aren't many managers in my area I will likely employ a similar strategy once I decide to outsource the management.

People I know that owned similar sized houses around me were regularly getting 1.75-2.25X what my house was renting for.

@Benjamin Ying The only way to cash flow in the current market is to employ a higher effort strategy like STR, MTR, rent by the room, etc.The "cash flow on paper" properties in stagnant markets or C-D class neighborhoods are probably not the type of places that you want to own long term.

One property the square footage was high because they assumed both florrs were same size and they were not. 

We will both keep our W2 employment for the near future just looking into getting an extra income or make our retirement easier.

But I would rather get a good-sized down payment that I can use to invest elsewhere and get a good sales price due to the cheap financing.