To intentionally reduce the leverage more than required is a foreign concept to me especially in the San Diego market.  

We discovered problems that required a lot of work and significantly reduced the property’s value, forcing me to lower the price.

This will reduce your risk and cash invested and if something goes wrong you wont be bled dry with never ending repairs.

The real issue is that they didn’t have a plan to monitor usage or set up protections to minimize costs during the eviction process.Ideally, the PM could’ve done things like:Limit access to unnecessary areas to reduce power use.Install smart thermostats to keep heat at a safe minimum.Request a utility cap in court during eviction proceedings (if allowed in your area).Bottom line: It’s less about the utility switch itself and more about proactively managing costs once the tenant overstayed.bro what? 

High probability that you’ll uncover an oh-$**** issue that will reduce or eliminate your projected profit. 

Freddie has similar intricacies, but also does not require a two year history of receipt; https://guide.freddiemac.com/app/guide/section/5306.4If you can use the rental income to drive the DTI down so that you can reduce the down payment similar to that of the FHA product, the benefits of the conventional option will outweigh the FHA option, as I'm assuming you have a strong FICO based on rate quoted with no points.  

Then ask them what your options are to reduce payments in the future.

This reduces your housing payment and helps you build equity. 

Since your goal is lowering monthly payments for better cash flow, it might be worth focusing on reducing expenses elsewhere or exploring other investment strategies.

Remember that the leveraged purchases are not going to add significant cash flow immediately and borrowing against existing properties will also reduce their cash flow.