My underwriting (which I suspect is more conservative than most) shows $14.5k/month cash flow after allocating for all expenses. 

A conservative view here: These capital improvements can be considered your increase in basis in the property, and when you go to sell you will have a larger gain.

We're looking for deals around 50% ARV with conservative close by comps using price per square foot if not comped using idential size and nubmer of bedrooms/baths. 

Am I being too conservative? 

I think there might actually be a way to both grow your portfolio and respect his conservative nature using the 1031 exchange.You mentioned that your properties were held in cash. 

I'm considering going to the bank and being completely transparent to ask for an increase in the rehab loan, but they have a much more conservative ARV in their appraisal based on much lower projected rents ($1,400 avg vs the $2,000 avg we're actually getting on the finished units), so I'd have to convince them of the higher ARV.  

Lenders are still unfortunately tend to be very conservative on the rent-by-room (SRO) type arrangements still - its an area that really could use some better understanding out there but just be careful with expectations because a lot of the treatment of these properties (even if nothing like a old-fashioned "boarding house") can be tough

(this is not a conservative view point, but in practice, you can either call or try to look them up.

When buying a new property today, I'd definitely be conservative when it comes to rental income projections.

I have also used the BP rental calculator and there seems to be a negative cashflow of $2600 per year, though this may be skewed due to conservative inputs or other factors, which concerns me.