Knowledge, flexibility, creativity and skill become much more critical in these types of challenging markets.  

Alternately, since you have small children, you could renovate 1 side first, move into that side and then renovate the 2nd side.  

He has no wife, no living parents, no children, and no siblings.  

If you ask them to objectively evaluate the condition of the house - say on a scale of 1 to 10 - your start creating doubt in their mind about the value of the house and set the stage for you telling them why you can only offer $X on the property, because there are $20k in repairs that are needed.By asking them where they came up with the number they are using as the value, you set the stage for challenging that belief, without it sounding like you are challenging them.Language is a powerful tool.  

My wife and I have invested in relatively low end townhouses in MoCo, however we are finding it challenging to find multi-family in that area or any place close to DC within our price range/level of risk.Either we've felt uncomfortable with the expense of the multi-family properties or (perhaps incorrectly) equated the higher priced properties as a tradeoff of low cash flow and possibly higher appreciation (due to increasing rents) vs higher current cash flow and lower appreciation in the more remote areas.

The lawyer said there are 1000s of transactions going on where these rules are not being followed and there are probably gray ares if someone wants to challenge, but thankfully my husband had the years of experience and we had the assets required to make the class A licensing possible with a just a few prep classes. 

Nothing wrong with that, but it might present a few challenges when asking for 100k on what sounds to be a multifaceted first deal. 

They are challenging...

Additionally, if you have children, I do not think this would work very well at all - too much dangerous stuff to get into.

The challenge @ this price point is the variation between the low comparables & the high comparables.