By adding the 3rd bedrooms, we were confident that it would increase rents and our valuation considerably.

If you decide not to renew their lease or increase their rent they need a 60 day notice, and you have to notify S8 as well.Outside of those 2 exceptions your tenant should follow the lease like everyone else.

We are already seeing an increase in defaulted loans this quarter and sellers being a lot more reasonable on pricing.

The key lesson is that if you rent to Section 8 tenants, their negative behaviors may result in non-Section 8 tenants to leave.Rent increases are more likely tied to the minimum wage.

The mortgage has gotten out of hand due to property tax increases, miscalculated escrow, and an increase in my interest rate from an initial buy down, increasing from $2600/mo to $3200/mo.

Each market is different but as a national average, the increasing rates have increased the inventory.

I'd have to do some research on the local market to know if this would meaningfully increase the value and the appeal as a rental in the long-term.

Is there a way to increase the cash flow from those?

Quote from @Rich Davis: I know there have been posts regarding the ever increasing cost of insurance.  

I know taxes and insurance have gone up a lot in that time so I understand that problem but the solid rent increases in that time have been able to cover most of that (at least for me it has worked out).