As for renting, going cash flow negative isn't great, and your home isn't likely to appreciate as fast as it would if it was a single family home, so holding with hopes of increasing appreciation may be a verrrry slow play, but if you can afford to hold, having a tenant pay down your mortgage is an additional great benefit to real estate investing. 

I've always had this dream of a beach home within walking distance to the beach, so I realize I probably need to back up and look at this more objectively instead of emotionally when it comes to extra wear and tear and higher insurance costs, weather impacts, etc.

What if you could get an extra $100/month on your rental because it’s in a better part of town?  

If your seller wasn’t planning on claiming the extra income on his taxes that gets even worse.  

Either way...costs have SKYROCKETED in the building material space...people who are building at such a low fee are likely their own GC and not paying themselves properly@Alex L. - What prompted the purchase of the lot? 

On my existing units most prefer to pay cash.

I told her I cannot afford that, which I assumed correctly that the so-called free blueprint is useless without paying $2,000 for the training program.

In my market a nice 3/1 might rent for $1350 as well but with an extra bathroom the difference is pretty negligible.

Maybe they added the extra square footage without permits? 

That way you can ask for 4-5% Seller credits to pay for the closing costs.