Previously the old deck (that was almost falling apart) had the stairs going circular (which is not up to code in Boston anymore) which gave my deck a lot of space.

If zoning legally allows you to have a two-unit property and this home meets current zoning/code requirements then you are fine.  

Location, Locationfind the neighborhood you are willing to buy..check the section 8 website for max payment in that zip code.  

I wouldn't group all of south Sacramento or north Sacramento, nor any one zip code into good or bad.

@Cheryl PepperBased on the very limited data you provided, I think you need to do a lot more due diligence.N Tuxedo Street is not anywhere close to Broad Ripple Park.The 46205 area code is pretty central Indianapolis, but you have a septic system - why are you even considering this?

But when we went to get permits, we found out that for houses in flood zones, if you plan to spend more than half of the current tax value on the rehab, you have to bring it to current flood code which means we'd have to raise the foundation several feet.

Those things just need to be reported to code compliance. 

The rental is the third least expensive in it’s zip code when I search on Zillow.

So, create status codes for both of these and a few in-between codes to help you work smarter, not harder.

This IRS code allows you to walk away with up to $250,000 in gain tax free ($500K if a married couple), and if that money can be invested for a better return(and ease of investment) elsewhere, it may be worth calculating.