However, we are taking over from a PM to self-manage and are inheriting the current setup.Our biggest concern is that this first communication from the tenant was a sob story asking for $500 back/off rent.

@Jay Hinrichs Definitely a concern for sure.

I'm more concerned about appreciation and equity so I'm willing to trade the cash flow for it, but I don't want to be in a situation where I'm barely breaking even and the stress that comes with it.Looking for ideas how I can tap into that equity to grow my portfolio but still getting some kind of cash flow to be able to make the monthly payments1.

I'm more concerned on if it's going to be a good deal or not.

If you were looking at buying in Florida, but your lender is in NY or California, they dont really have to be as concerned about their reputation because the realtors (most likely) will never work with them again. #1 is the primary reason, but #2 does factor in as well.

Mortar, paint & bonding materials deteriorate leaving cracks, gaps, etc. which can be concerning to look at, but this is very often addressed with repointing.

I am concerned that it is a ponsi scheme.  

Sharing your concerns can help others learn and overcome similar anxieties.

Please see my earlier response to address your concerns.

And don't expect the compliant tenants that complained to stay after you minimized their concern and did not address it.