The property was rented and generated $160 cash flow after mortgage, taxes, insurance and property management fees were paid.

You also need to consider that at a lower percentage of money down you will be paying a Mortgage Insurance Premium or MIP. 

You have 3 years to take advantage of the homeowners exemption. 

I flew there and walked the house, looked pretty turnkey rental grade): $1029 GFCI outlets, downspouts and guards, drywall, paint, bathroom vent$4615 (new AC unit since unit was stolen before tenant moved in, didn't file insurance claim because didn't want my premium to go up) $600 (water line, gas line, P trap)$60 lawn mowing$112  thermostat repairMy opinion is that Class C is better for local investors who are on site and know how to do repairs and self manage.

You payment is $2,600 plus tax and insurance.

Deduct NEW property taxes after you buyDeduct home insurance costsDeduct maintenance percentage, typically 10%Deduct vacancy+tenant nonperformance percentage(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)Deduct whatever dollar/percentage of cashflow you wantNow, what you have left over is the amount for debt service.Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative price to offer.If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.As long as the ARV checks out, this is the purchase price to offer.It is probably significantly below the asking price.

We also recently got notice from our home Insurance that they are cancelling our policy because of exposed wires discovered by their inspector.

It also negates the need for insurance - although that isn't our MO. 

Be sure to hold a hefty reserve to handle on-going maintenance, capex, taxes, and insurance.

Did the insurance get cancelled in this case.