Underwriting my deals more conservatively, stress testing the deal (increasing cap rate by 1-2 points, making sure the deal still pencils out at 65% economic occupancy, etc.), having ample reserves (6 months-1 year), etc.

You will also pay more than cap gain tax on your depreciation recapture.Also, your down payment is not that 70k.

As mentioned, on a short-term real estate transaction, which a flip is, you will be paying marginal income rate not Cap gains.

If the latter has higher appreciation rates (or depreciation in a bad market) does the fact that the appriciation is capped (though it may still seem good if you bought the property for 80% LTV and sold it rent to own at 105% or more) present a problem in your eyes?

I would add in more allowance for vacancy and set aside some cap ex funds, but I don't know your market.

Cons: Payment shock at the end of 7 years, depending on the caps, your rate could fluctuate 1-2% when it adjusts. 

Loan amount will be capped at purchase price plus refinance closing costs on the cash out refinance, assuming the appraised value allows for it.

This means if you rent it out and sell within 3 years of moving out.....the gain is tax free....do the same but sell in three years and a day, full gain is cap gains tax.

If you live there 2 out of the last 5 years as your primary residence, then your cap gains will be tax free (up to $250k for singles or $500k for married couples) ... to be clear, I think you probably should NOT sell at all, but if you do decide to sell, you need to be aware of this rule for timing as it could save you 10's of thousands in cap gains taxes.

TOTAL = $2343This results in a whopping 3.3% CoC return and a CAP rate of 7.41% which doesn't even beat my assumed interest of 7.5%.