HOA Rental Limits- Cancel Contract?

[Chris Virgil-Stone]

I'm currently under contract for a townhome in a lower/middle class area. It's a 2/2 townhome, all nice finishes (including all granite and tile). Plan to rent for $995, purchase price of $88k. I have $1k earnest and am just past due diligence. There was a lag in getting info due to the available HOA rep not knowing and the holiday to get rental restriction info since it wasn't clearly spelled out in the covenants. Found out today that they limit it at 5% of units or 7 total. Researching the county records you can clearly see that 40-50%+ are rentals. Would you proceed with purchase or chalk up the earnest money as a loss? Keep in mind most available properties are in HOA (all 3 of my current units are).