If any of the utilities require an inspection or any repairs do to their inspection you are out of luck as HUD allows no repairs prior to closing .  

Though he was telling me it's impossible for him to give 100% accurate repair estimates without looking behind the walls.

My plan is to finance with an owner occupied conventional loan, live in it for one year while making repairs to the one bedroom side, then move out and rent both sides.

No matter what class the property is you should be providing a clean, safe home in good repair.

But I would make sure you take into account all expenses (taxes, insurance, property management, repairs, CapEx, etc.) to determine monthly cash flow.  

I am looking at deals that all in after repairs will likely be  under 100k.

It is in a class B neighborhood and all the repairs are done on it.

You will never find 2% rule in hawaii, its more like .5% unless you are looking at vacation rentals.  50% rule is again a guideline for quick analysis, when you actually start crunching the numbers this rule goes out the window.  70% rule is for after repair value, not what a fixer upper is listed for. 

and have run into a snag.The HVAC needs some repair/maintenance work, and we aren't getting heat into the building.

You might think they should have known better, but there is zero reason for them to have thought that these couldn't be flushed.In my opinion, this repair is on you.