Giving my financials a quick overview, he stated that he was not sure I could get pre-approved based on my income alone that I would have to include the rental income on both properties.  

I am a real estate broker in Windsor CT but have another brokerage based in Fairfield County with agents and an associate broker.

Based in Charlotte.

@Nicholas MischThe ARM product was developed by bankers to induce folks to get a low introductory rate that they could get approved for based on their income and debt levels because of the lower payment terms.  

A seller financed (SF) note is not the same as a purchase money mortgage, it is funded by equity based on an agreed sale price, this makes it an installment loan and a different animal than a cash funded note.Institutional notes have a due on sale clause, an SF note should have if it is common for your jurisdiction but it may not have.

Am I on base with my recommendation?

I realize that everyone is going to have different input and advice based off of their experiences, but I'm looking for assistance as to whether something I'm including is a definite NO NO, or if something should be added in for increased impact. 

You will only get so many based on current rules and your debt to income ratio.

@Harry Gamble The cost of insurance will vary greatly based on the individual property types, specifics, and locations.

Run the numbers and buy based on what is and not on a story of what will be or could be.Was it a project that got stalled?