I recently had a clients home appraisal come in $15,000 under but it was clearly like size comps to justify a higher price.

All the sudden that starts to justify that extra work of an Airbnb.

Sure, we could have just played the numbers game and submitted a lower offer, justified it with the condition of their house and the fact that we are paying cash and could close FAST.

There are so many start-up costs when renting to someone new that I feel very justified with that extra charge.

The rent won’t be high enough to justify the 20% I would have to put down conventionally. 

Even then, I'd wait to do it as tenants can be hard on homes.Are there other units in the area renting for $950 or 1000 to justify increasing it that much?

No penalty just the exchange fee (actually part of an exchange fee since it's a deductible cost of sale) and maybe worth it if the profit justifies it.

Do I justify the offer?

That means the value of this investment is $1,500,000 whereas it's only being valued at $1,000,000 based on the cap rate (the cap rate seems to provide a sufficient return on its own that justifies the $1,000,000 investment value.)  

Am I crazy for taking such a financial hit, or am I justified in taking action for my dream?