Just based on the info you provided I would take the loss and move on.

Are you looking to quite your W2 job--STR might get a leg up because of the STR loophole in becoming a real estate professional? 

Even if the rental has a decent cash flow with additional flood insurance, we're still not sure we want to take on that risk as we are out-of-state investors (planning to move back to KY in the future, but not now) and we don't like that it will potentially bring down the perceived value when we try to sell it in the future.The seller has never lived there and has not provided any information on if it has flooded before or not. 

Quote from @Tim Baldwin: @Nathan Gesner, that form should not be used, as it provides for 60 days notice to terminate a month-to-month tenancy, which FS 83.57 only requires 30 days.It was a ten-second search for an example.

Thanks,BrettLocal PM here - happy to help identify investment opportunities, provide investment analysis and connect you with contractors, agents, lenders etc etc. kindly let me know and I'll help in any capacity I can.

In turn they provide me with a steady flow of off market properties.

That's great that he travels so much but ask him to provide where he rented and where he slept during that time. 

I am not a CPA and am not providing legal advice.

It was my only option because I had limited funds and wanted a better future than my day job alone was going to provide.

Providing a lease to the appraiser can also help in giving them an idea of the rents that you're expecting on the report while also confirming that there is demand in the market already for the value that you set the property at.If you're looking to refinance a property using a DSCR I would be happy to help!