The seller is paying 20k in mortgage interest, given the current interest rates I would need to 45kish in mortgage interest for the said STR.

Hella cheap and quality things there to furnish each of your units.When you start feeling nervous, look back to your numbers to remind yourself of how good a deal it is.

They bought a cheap duplex in Milwaukee, fixed it up nice and can't get a tenant even though we have a rental shortage.

There are plenty of lenders that don't require experience to lend, but leverage/rate might be altered a bit.

However we found some pretty cheap third party flood insurance. 

I keep wondering about insurance, vacancy rates, if tenant selection is a bigger/ different factor, terms of the tenancy and differences in opex and capex?

In some markets you won’t get the higher booking rates and occupancy numbers without a pool (Florida and Arizona come to mind). 

It can be challenging for 1-4 units depending on the property characteristics, your loss history/other rating factors, and location.

Whenever you are using leverage, you need to have ample slack in the system and sufficient cash reserves (or access to cheap & instant cash) to cover vacancies, capital expenses, unplanned maintenance, and other issues to avoid missing your note payments. 

Do school ratings matter for SFH?