If it was something that they may not have known about (like foundation stuff), then I could see them asking for money to be put into escrow to do the repairs or a price reduction. 

Remember, you can sell your rental any time you want (at least list it) in hopes to sell it for the same or more...If your Single Family Rental investment happens to appreciate over time, not only do you get to cash in on the equity that the tenant paid (mortgage), cash in on the monthly cash flow (balance left over from mortgage) BUT you collect the extra $ from the appreciation of the sale....Buy it for $50,000.... 5 years later property is worth $65,000... that extra $15k goes right in to your pocket... along with what you collected monthly and the principle reduction the tenant gladly paid for you!

So look for someone you can connect with that works out for your situation.2) It is a reduction of your basis in the property.

But without a principle reduction, people who are underwater won't be able to refi.Sorry, but I just do not accept that people who bought houses they cannot afford, or could only afford based on a teaser rate, or bought with liar loans betting on raises or appreciation to come should somehow be allowed to have part of their debt discarded and allowed to stay in those houses.

I was able to get price reductions for my client because of it.

We are already starting to see the reduction of PMI, more low down loans, and as rates creep up and less super strong borrowers look to buy houses you will see banks need to lend capital.

The interesting thing about this deal was that the numbers didn't work, until the seller agreed to bring 9k in a principle reduction payment in order to reduce the remaining loan amount.  

I get constant emails from realtor that say "price reduction or new price."

When you sell the note, you'll hopefully have a gain, your purchase price is your basis, if you buy with a 25% discount, then 25% of the annual principal reduction is regular income on the investment.

If you have a vacancy, there is virtually no cost, outside of lost opportunity cost, and therefore a reduction in stress.