They’ll even do a two year interest-only which will give me over $5k extra cash flow a month.

That extra liquidity will help. 

By "defense", it means your cash flow ensures that you get to keep the house (paying expenses/mortgage) while making a little extra cash.

If you do a VA loan it takes extra time to pay down since you don’t have a down payment requirement and also have a VA funding fee that adds to the debt.  

Most sellers are happier to fix the property themselves than to give you extra money. 

The funds seem like a good way to gain greater exposure and get an extra layer of due diligence done for you, but there must be downsides as well.

In 20 years, should she still be there and require any extra additions, collect a deposit from her to cover the costs of removing them once she leaves and ensure they are professionally installed-at her expense.

., title company / attorney fee, recording fees, etc)  I have done this once and am thinking of doing it again, since a cash offer is more competitive and the numbers still seem to work with the homes I’m considering (I’ve estimated that the extra cost in my case is ~$1200, which doesn’t kill the deal)

I am wary of choosing just any lease agreement as I'd like to add in a few extra "rules" to the lease.

I only throw it out there as an extra push to get your first or subsequent deal done.