I am by no mean an expert on how to proceed, these are just a few options I would consider.

Get extra liability and call it good.

The house is in a pretty great neighborhood with excellent schools and options to commute to most parts of the bay area and I am confident that I will be able to rent it out soon. 

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

As a result, seeking option to purchase the property with 20% down with a FHA loan.  

The reality is the resale value might be greater if you combined two of the one bed units to make a two or three bed unit so the property would be a four unit property and qualify for the 30 year debt financing of conventional owner occupied multifamily property.Another option would be to split off the house and sell it as a separate unit.

Hi Lisa - DSCR would be a great option for you.

You could consider house hacking though, this will allow you to live on your property while the rental income helps cover your mortgage and potentially generate additional cash flow.Another option is to start small with a single-family home as it typically requires a lower down payment.

After hearing that I definitely got excited and started counting chickens before they hatched, as 1800-2000 extra dollars a month would super charge my cash flow.

There are a few different options/ methods (avoid the dry well in this case).