those are great gross numbers and of course you need that for that price point as the risk of going back wards is greater.for us  15% of gross is a great day.. 10% is avearge.. anything over 15% is a HOMERUN

And those rules can vary lender-by-lender since they carry the paper themselves.

Although your property is currently not on the "High Risk" side of the Big Island, you are still going to take a big hit occupancy wise. 

Lower occupancy also yields less wear and tear, risk, maintenance and cleanings. 

I am not sure if hard money lending doubles flip risk or not?

@Matthew McNeil It completely depends on your goals and risk tolerance level.

Capital improvements should be an expense of the land owner as part of a lease option, otherwise you risk throwing that money away if you do not exercise the option.If the Seller's big concern is taxes go with a straight Seller Financing arrangement as it will provide the same outcome. 

All NOW carry low loan balances and live in same home.  

What are your thoughts in terms of the risk I am taking on? 

No reason for them to take on that risk for zero reward.