You will be lucky to break even.I strongly recommend you stay conservative with all your analyzing until actual numbers can be verified.How did you arrive at your Offer price?  

I questioned that when I read that but just figured I was just not yet aware of potential opportunities out there where you can get a bank loan for 90% of the cost (and pay PMI) or maybe bring in a partner or private investor to cover the other 10% of the 20% down payment to avoid PMI? 

I am on a month-to-month lease so if my timeline is moved further out, i should be fine (my hope, timeline stays the same).

You could also contact one of the Chamber of Commerce to get their help for where you should locate and if he was aware of any future development that might effect you.  

Questions:-should I stay away from investing in a town home due the common risks (smaller buyer pool, potential HOA issues, large competition etc)?

I am aware of the tax benefits however like I may have mentioned, my next step in my investment adventure is to fix a house up and sell it in less than a year.  

The good thing is you have stayed conservative with your analysis.  

He ended up staying but if he really wanted out I would had let him.

It would be considered a war zone property.

Obviously Rentals will stay under pressure on not so good subdivisions.