Assuming $5k for minor repairs, and that you'll need to cover her $2k closing costs, that means your all-in cost would be $107K - $112K for a house with an ARV of $120K. 

I do see the value in being able to use FHA financing to acquire and potentially fix cover your rehab costs but based on the necessary repairs I would ask for either a significant reduction, the current owner to complete all major repairs, or just move on. 

If you were to take 25% of monthly rent to cover these expenses your cash flow would be as follows.$925x0.25=$231.25$925-$660-$231.25=$33.75 in cashflowTake a look at these additional expenses in your area and what you need to pull out as reserves for future expenses.

Just a quick thought, you might be able to do a house hack near your school which could cover your housing cost and make college a little cheaper. 

However, my area (high cost-of-living) could make breaking even or positive cash flow difficult.The main question: is house hacking worth it or a "good deal" if cash flow from the rented units doesn't fully cover all expenses but you're significantly reducing living costs?

I will also have another $2600 in pre-paids that cover the mortgage for 6 months and 7k in closing costs.

However you are fined by the govt for not being on Medicare and insurance companies won’t cover you for expenses that Medicare should pay.  

Set aside something each month to cover for it when it does need repair or replacing.Hot water tank: 10-15 yrs max life, $650 if installing yourself, otherwise $800Furnace: also 10-15 yrs max life, $1500-$2000Roof: $7000-$17000+, depending on size and condition.  20-30 yrs max life.  

Will also want to consider putting clauses in place to cover if I sell the building or we end our owner/manager relationship, the lease could come to a end.Thank you

Plenty of homes rent for less than a mortage would be and it wouldn't be hard to cover the rent with some investment in the Midwest.