And then I started doing the math on the purchase prices (which were greatly reduced obviously) versus the rents and I just didn't see how that couldn't work.Its not as easy as it sounds.

I am speaking from experience when I say it is super stressful to share your home with a free loader. 

This can eliminate or reduce the chances of a claim against your policy and help keep your rates stable and less likely of being cancelled or non-renewed.All apartment complexes in our metro areas require them, there is a reason.

Seller agrees to apply $500/mo towards a reduction in the final purchase price"This was quite generous, since the going rent rate is easily $1600/mo in my area.So, if you don't buy, there is no price to reduce, but I guess it should have stated that it was forfeited altogether.  

Keep in mind overhead/cap x is delayed, not reduced.

Your risk is reduced because you are not an owner of the property, and you are not the one flipping the home.  

It's understandable that this greatly reduces my opportunities.I'd like to thank you all for your comments and questions and hope that this thread will be of assistance to others wishing to develop their knowledge in this specific area.

Does anybody have any advice on negotiating a reduced payoff of a 2nd mortgage.

Props to all you flippers, but it just seems way too high stress for me!

Depreciation is also reduced buying at a lower price.