Typical rentals in Highland Park for a 2 BR 1 BA run about $800-$900.

Listings on MLS are typically priced at or above RETAIL market pricing. 

@Quandra Adams - your lender is correct and somewhat incorrect at the same time.  203k's allow for any renovation related fees- such as the HUD consultants work write-up ($400-$1000), draw inspections (up to $350 per and max of 5), title bring downs (typically about $100 per), architect (if your using one), engineering (if applicable), etc are allowed to be financed into your renovation budget. 

Is this sort of arrangement typical?

Typically, you'd need 20% down, but I've seen it where you can go as little as 10% down. 

The numbers typically do not lie.

From my experience: Typically, one thing to look for in true masonry built houses are the header bricks.

@Surendra Chawla What you describe is possible in areas that the typical Intel worker will commute from.

It happens all the time for multiple reasons.I’d say a typical tenant stays 2 years in a house and maybe 1-2 in an apartment, depending on class

They are also typically shorter termed - like 5/1 and 7/1 ARMs.