@Danny YeTake it from me, the worst thing you can do in this game is worry about anything other than the next step in front of you.

For long term success, the opposite is better: get the worst house in the best neighborhood

So when the water heater goes out a 1, you can pay for that from that months cash flow (or worst case, from the emergency fund) and not have any issues making your mortgage payments.

Great question - The first cleaning company that came to quote the property told me it was the worst they had ever seen and after talking with the office manager, said the job would be out of their scope of work.

Lease options are like REI's version of "A Tale of Two Cities"..."...it was the best of times, it was the worst of times", it was a complex strategy, it was an easy strategy, and because of that it would be hard to go into too many details here. 

I would like to offer in the 340-350K range but sticking with the asking price as a worst-case scenario. 

Unless you have a signed contract with a scope of work, and even then, the estimate may be coming in low, a common strategy to get a client, underestimating the rehab (oh its labor only, doesn’t include this or that, demo and hauling not included, and or he’s not licensed which can be a problem on a quick flip.)I suggest really thinking through for the worst case scenario, that the condo doesn’t appraise for what you expect, the rehab is higher than you budgeted, you may struggle to find a tenant (days on market for condo rentals is high right now, lots of price drops).As a buy and hold, you really need to look at the HOA and how that affects your cash flow and return on investment.

The worst they can say is, no!

She also mentioned that now is probably the worst time as the monthly income was over $4000 before the pandemic.

I would base your numbers on the worst case scenario which would be around 80% of the purchase price.