So you'll have to find a new property that will fit the budget. 

Based upon this I would look at an actual dollar amount, not percentage that: 1) enables you to live in a safe neighborhood and decent schools district, is modest in size and fixtures, and has payments sufficiently small that you are still able to invest at least 10-20% (or whatever your target is) of your income. 

The property is in a C grade trending towards B grade neighborhood, close to shopping, public transport, and a solid high school, has all new windows, updated roof, masonry, electric, and rear porch, and one of the 7 units was fully rehabbed recently.

a $150K house in a $130K neighborhood is not a bargain. 

The code violations are based on the property being left vacant with no upkeep, making it a public "nuisance" to the neighborhood. 

Because the property is in a gentrifying area, the 100% Financing option doesn't fit this HML's criteria so I'd need to bring roughly $42K to close.

What's a "good" neighborhood there?

Especially in regards to the due diligence, which are small words to fit some big items. 

Neighborhood-level data is more volatile, but in the past three months, median prices have dropped $397,000 in Kirkland-Bridle Trails, $125,000 in East Bellevue and $87,000 in Southeast Seattle.

You can alter them as you see fit, as long as it doesn't go against signed leases.