I tried to adjust the following year to my W-2 income...they look at gross wages on your W-2, not net (net of 401(k), net of before tax health insurance, etc.) which is what your 1040 adjusted gross income is based on it. 

I had brought up the point that most places are going for 5-10% off asking, as well as I’m saving her the 6% she would be paying in agent fees since the awesome guys at Deacon-Hoover are handling my paperwork, but was only able to bring her down to $195,000 which she seems pretty firm at.My dilemma is I really like the place, I have a ton of tools and constantly flipping/rebuilding motorcycles, cars and jet skis so having a garage in the city is very crucial to me.

Look at tax free accounts such as Roth IRAs/401ks and health savings accounts and do your investments there - much smarter move. 

It's a very nice dilemma your folks have gifted to you!

Many locals that left due to power issues,  health etc are coming back.

There is a certain health ratio for restaurants after food and labor costs.You need to figure out what you want the ground rent to be based on all the costs involved and how long you want to hold the property.Generally the longer the primary ground lease the more value it can have for resale unless the tenant want given a sweet heart deal with little to no rental increases.What tenants often want is FLEXIBILITY in termination clauses and short primary terms with options.

He said he would take it on for a fee so I was happy to this portion of the project off my plate.1400 – Preliminary Short Platting Services2250 – Boundary and Topo1965 – Preliminary Short Plat Map7,865 – Ready for preliminary short plat submittal 350 – Tite Report, Mailings, etc.4950 – Spokane County Preliminary Short Plat Fees950 – Spokane county Regional Health (may not need until final SP)6,250.00 – Fees needed to submit preliminary short plat 2250 – Geotech (needed for design, held 2250 for construction inspection)11550 – Site Design (held 1000 out for construction observation)13,800.00 – Fees to develop design and construction drawings Remainder for inspection, certification, and final platting.

This adds up to $1,200 a year for a 6% annual return.A couple months ago I realized I had to sell the property for health reasons. 

That is very, very low if your tenants are injured and they are holding you responsible for their health costs.Minimum of $1M for liability, $2M if you can afford the cost.

Where there is some additional questions are whether items like health insurance for myself and my wife (the premiums not the actual medical expenses) would be considered part of this overhead (in the past we HAVE NOT put this into the "cost allocated" calculations for Sch E but instead listed them in Sch A.