Sale $450,000 Real Estate Agent Fees $27,000 Principal $317,000 Closing $2,500 Cash Out $103,500 Cap Gains ???

Many investors in other countries, unstable areas, are not phased by having partial principal loss, because that's just a feature of most of their economies, and when they are making money they're making so much of it so obscenely that losing some principal is just a cost of doing business. 

Do not touch any principal you invest.

I bought it as a bachelor pad 6 years ago, and now have around 25k in equity.  2/3rds of that has come from appreciation and the remainder from paying down principal. 

Which means: How will properties that generate less than 1%/m gross return attain positive cash flow, when their expenses include around 50% of that revenue, plus the principal and interest repayments on 70%+ of their value?

@Brent Coombs I made the mistake of using the cashflow to pay off principal on the mortgages and maximizing all Roth IRA and TSP contributions each year.  

That gives us what we need for instance: Say the house is presently worth $120,000If the house sold for $100,000 in August 2013 and the interest rate at the time was 5% with 3.5% downPurchase $100,000Down 3.5% - $3,500Loan Amount $96,500Interest 5%Put those into a mortgage calculator and the payment is about $518 a month WithOut taxes or mortgage insuranceLook at the amortization table and after 5 years of payments the principal balance is about $88,615So, present value (PV) = $120,00Amount owing = $88,615Assumed Equity = $31,385Build a spreadsheet so you can change the variables.

Then, rent that first home and use the rent money to pay extra on the principal of the second that we just purchase.

I am somewhat aware of different options I have, like working on paying towards principal to get to a place where I can refi, increasing property value being aware of appreciation, etc.

The difference is the principal gets reduced in the note vs it doesn’t on your asset but you will find that over 15-20 years you will put a good amount of $ in a rental and with a note it probably gets refinanced out in 5-10 years which typically bumps your returns higher