with that said, should you increase your down payment to mask flaws in an otherwise terrible deal - an alligator that will eat you alive with deferred maintenance that is in a worse neighborhood than you think, but an agent sold you on it because it has new countertops? 

i would use steel wool in any holes then caulk over that so they will not want to eat that.

No cease and desists yet, but its touch and go. 

*Sources: Old Town North Power Plant Redevelopment Frequently Asked QuestionsPotomac River Generating Station CITY COUNCIL HEARING (Detailed breakdown of the project here)Old Town + All of Alexandria: Alexandria's RiverRenew Program Will Allow Residents to Swim and Eat Fish From the Potomac River by 2040Alexandria's Potomac River waterfront properties have served residents with phenomenal views of the river, National Harbor, and Washington D.C., making the real estate there incredibly desirable.

Trying to have my cake and eat it too by paying off the mortgage and having that comfort or largest expense being gone, and still being able to scale rental properties with the liquidity of the all in one.

Put the profit towards a new Primary residence and ~$50k towards a rental property.2) Rent it out and eat the cash flow loss, hoping rents increase.

You’ll eat it on fees with HELOCS on investment properties.

looking at your breakdown, the margin leaves very little room for error, especially with holding costs and commissions eating into your profit. 

Personally I think there are good loans out there but people look for the "perfect" loan that fits their buy box and meets a desired return - which the return is going to be based on risk.So for many you cannot have your cake and eat it too. thoughts?

HCD has no bite, but they would send a cease and desist letter to any entity that is trying to remove a safe unpemitted unit as their mandate is the protection of the various housing mandates from over zealous local jurisdictions.