Buying and house hacking, or owner occupied multi would lower my rent.

Just had an appraisal done on a property and the square footage came in 587 square feet under what the tax records list.Still appraised for the full asking price at the lowered square footage.

A cash buyer may come in with a much lower offer.

I checked and double checked (and asked her to check with her boss) because that was lower than any other bank I spoke with.

Here is how that pencils out:------------------Buyer 1 (with an agent)$500,000 offer amount- $15,000 buyer agent commission (3%)$485,000 net to seller------------------Buyer 2 (you without an agent)$490,000 offer amount- $0 buyer agent commission (no agent on your side)$490,000 net to seller------------------As you can see from above, the seller would make more money with a lower offer from you - and you have less debt than if you were represented by an agent.

Hobart is slightly "lower class" than the rest of them, but it's an excellent rental market.

Neighbors are awesome, but it's in a lower income area and there's not really a huge market for a tiny 2 br cape code that needs new windows.I am emotional about it because, again, I'm not doing this for "business", I'm just trying to pay for the house and be responsible versus foreclosing because I can't sell it.

Does these numbers work at this price point or should my offer be lower as a multi family investment if so what do you suggest?

Similar downpayment of 5% (as opposed to the FHA 3.5%) and the closing costs will be lower. 

I don't think you can get less than 5% for an investment property, without paying points to lower the rate.