These are my opinions and assumptions.

Of course my fairly uneducated assumption is that if we were indeed finding ourselves in that awful scenario, the housing market along with the rest of our economy would be negatively impacted. 

Even with assumptions (not a fan) of buying at a lower price and raising rents by $100 or $150 to market, the 50% rule still yields break even or very minimal cash flow.

I am suggesting this with the assumption that your not going to be washing in high volume.

Greetings Olga B, If you could give me some numbers to work with I can definitely provide a better analysis of your situation like how much your PMI going to be monthly, how long are you going to wait before you buy another house, and your financial situation currently.Base on assumption  I would pick 2nd option because you would have better cash flow when you rent it out.    

Here is a spreadsheet I whipped up for reference:Given the assumptions of 3% Rental increase and 3% Expense Increases, you are absolutely correct, it breaks even by year 13 as you can see in column T.However, I wanted to see how the monthly Cash Flow will be affected.

@Wayne Brooks: I thought about someone buying the building under false assumption. 

I'm going to make an assumption (feel free to correct me if I am wrong) that you are looking to open your first location for the fitness studio, so you are new to the industry.The honest truth (and you may not like to hear this) is that most experienced brokers would not really want to work with a client who is opening their first location. 

I am looking for syndication opportunities with experienced sponsors who can generate the types of returns you are mentioning (without unrealistic financial assumptions). 

You may want to check the assumptions you're using.