My carrying costs on this property are low and even at $1200 with heat I would have a positive cash flow (albeit very small) assuming 80% occupancy.  

@Tim Jacob -- In regards to your advice to Annie about screening PM's, any data supplied on their occupancy, retention, screening, etc. is always/already coming from them; i.e. not so good PM's can supply not so good data.

A major obstacle that I'm encountering is the owner occupancy vs renters ration.  

You will have a constant flow of potential occupants.

With you living in one of two units 50% occupancy I would say it would not be easy for A lender financing unless you have some kinda inside job.

I hear lenders have a requirement that you must have 2 years as a landlord before rental income can be considered for additional non-owner occupant loans.

Hey Brandon,Your current agent is right, you're going to need 50% occupation for it to be re-classified.

Utilizing the 203k seems like a decent option to get the rehab work done, but make sure you understand the rules, as you’ll have to be an owner occupant, which will play a significant role on your cashflow.Lastly, I didn’t see a budget for vacancy, repairs, and property management (even if you decide to self-manage).

@Adam Barr, loans that require owners to be the occupants, VA, FHA, USDA, mean just that.

If you buy it with an LLC, you do not get the tax free benefits of a primary residence when selling, and you can't get owner occupant financing.