In that time, we moved, kept it as a cash flowing rental and the property has increased in value from 85k to 200k.

Would you ask for a non-refundable pet deposit and increase rent or just one or the other?  

By doing this, you will hopefully have increased the value of the property in excess of your purchase price plus the repairs you put into it. 

My project manager/mentor was advising me on the deal and kept insisting that I should gut and remodel the entire place because its value will increase tremendously.

We can afford to eat the mortgage payment, but would rather not of course considering we started down the REI path to build wealth and increase cash flow, not dent our wallets. 

Love the interior colors, what are they?

Once you build a relationship with them through multiple loans they'll increase the percentage up to the full amount.  

(On a more general note, I am becoming increasingly interested in real estate investment and am enjoying this hobby!)

Once DD has stared and I can flesh out the operational details like what will CapEx look like month 15 when I have to replace XXXX and this county adjusts taxes biennially so in month 21 I can expect a 10% increase.

Waiting on the appraisal which should be completed in a few days, it will be interesting to see if they appraise it at a 3 or 4bdrm.My current plan: Increase final selling price by 2.5k and ask for 5k back in seller concessions.