Top two things to do are to:educate yourself on the different aspects of RE, figure out what makes the most sense for your life goals, and to pursue a deeper knowledge of that areafigure out your financial situation because that will dictate what you can/can't doI guess that was more than two things...

The market dictates that a rehabbed house of this size can get $1100/mo (hits the 1% rule after rehab). 

Your local laws will dictate though.

BTW, what is dictating the balloon.....your underlying mtg, a wrap mtg that you have on the property, or just the purchase contract?

Local property code will dictate this.

Look at. the FEMA flood maps to see if it is in a flood plain. www.msc.fema.gov The zone on rhe fllood maps will dictate what kind of flood insurance you might need.

That means you just lowered the rent for all the increases too.2 - If you allow them to dictate the rent, you will have a harder time raising it down the road...that's if you can at all since they've already established they want a lower rent than the going rate in the area...and they are well aware of what that going rate is.

I paying 7500 on a 78k property.  2500 of which is a loan level pricing adjustment which is something dictated by fannie mae. 

Never let them dictate what goes on in your property(no matter how small it may seem)

All of that will help dictate what you choose.