My thinking is that sticking with the blanket criteria will provide the protection of sticking with the numbers and not making “exceptions,” but you may lose out on opportunities for commanding higher rents in the first case or may lead to higher vacancy rates if you don’t adjust down in the latter case mentioned above.

@William Robinson I would advise working with a broker who has a strong command in how HUD homes and Fannie work.

Unless you are able to command a similar re-sale price point without the nice garage/driveway, and while also completing the rehab for a significantly cheaper total cost, you will likely find the upside a bit thin.

I think 1400 is reasonable for the area but I would say the quality of the home would have to command those values.

I personally prefer 2 bedroom units over 1 bedroom units for a multitude of reasons.Typically more desirable, commands higher rents, less turnover as tenants tend to stay longer, etc.

I'm waiting to talk to a local police officer, who isn't bound by real estate agent law, and can answer questions about the area.I realize this area will command a lesser tenant. 

I also know you can contact commanding officers and let them know about issues.  

If you can't make the deal work at 130K maybe come up a bit if you think it could command more than 175K ARV, if not then move on and look for another deal. 

Honestly, it's too bad that the operating part of your dad's business does not carry with it some residual value of some sort with regards to that commanding a sale price.My hunch would be that this would be far too risky to embark on as a first go of things.Especially, from what you're mentioning this may have a large impact on the quality of your dad's retirement.If you have the funds and can structure something, the place to start would be to engage with an A/E firm to get a cost estimate generated for a concept building like you're mentioning. 

I'm a pretty new investor myself but if I were to give any thoughts I agree with @Thomas S.I would think Seattle area would command much higher rent than $1600 for 3/2.