The keys are persistence, patience, and diligence.Keep in mind, that rent doesn't behave like resale value.  

Reassessing my RE Inv i realize that I mayn't be having a sound plan.

There is also the possibility that the condition is worse than you may be able to see from MLS photos, and the property is actually priced appropriately based on the extent of repairs needed.If it is at 60-90+ DOM they may be having trouble selling the property (possibly due to condition) and have lowered the price significantly to get it sold ASAP.

I will be having another Google Hangout in a couple weeks for Sellers to test that out.

I would definitely be having a frank discussion with them, followed-on with a letter giving them 1-2 rent cycles to cure the problem.

One thing that nobody has mentioned yet (how did Bill Gulley miss this thread) - you have to be very careful in how you behave as the "middle person", since that sort of activity is considered brokering and requires a real estate license.

2) Have the tenants generally been well-behaved?

I think there is a pretty good chance that we see markets on the coast behave differently than the Midwest, so if I would be in CA I might be more concerned.

It behaves like a traditional 30 year loan where you make payments that include principal and interest but the principal balance remaining at the end of year 5 is due then. 

Your PM is showing you how they will behave moving forward.