Depending on how much you can rent this home for it's a pretty nice-looking deal.Things to be diligent about- Make sure your comps are spot on (Use an appraiser if possible, for your comps)- Make sure you can qualify for a Fannie or Freddie loan for the best rates.

I recommend this approach as you'll get an idea of what you'll walk away with, what interest rates will be like as a purchaser and with that information you'll have an action plan devised on the spot!

I cannot overemphasize how important it is to have a solid grasp of what conservative income might be - because buy in the wrong spot and you've got $225k sitting in an empty house.  

If I want the highest cash on cash RoI and highest cash flow, how do I know what the sweet spot is when considering a down payment?

First the home is excavated around the house to allow for holes to be made in your current foundation, then the steel beams are placed in these spots.

The sweet spot is a professional that is charging the right price.

I was in a similar spot.* I raised cash by completing real estate deals for others.* I stopped spending on frivolous.

Have beefy cash reserves available to tide you through rough spots. 

Jaron's answers are spot on.

It does seem that this a blind spot that is not covered by the code or regs.