On the main level completely renovated eat-in kitchen with upgraded granite countertops and Energy Star stainless steel appliances.

And what about Service Animals, does this person know how to handle that, have they been trained?

Holding costs, closing costs, selling costs can often eat up 15-20% of a deal. 

Any agent fees and closing costs may eat up any profit.  

You don't have to set your sights as high as $700,000 you can find Multi's in good neighborhoods in good repair (though they will need updates) for $450-$500k+ , the problem you'll fid with house hacking with an FHA loan (which is the cheaper option) is the mortgage insurance will eat away at your returns and depending on where you buy that premium may cause you to only break even.

He's paying $900 for the animal.

@TJ DanielYou can require documentation that the animal has gone through the traibin g to become a service animal.  

Short story you can have your cake an eat it too. 

I'm trying to reduce the cost of "bad tenants", while hopefully not eating up all my profits in the process!)

I have heard a loose argument to eat the difference and be made whole come tax time.