A 'transient' neighborhood or type that attracts seasonal workers or students will definitely reduce the average stay.  

I'm going to redo the deduction summary ... reducing or eliminating some of the items that could be wear/tear (closet bars/doors, etc).

We do not want to sign this but I am stressed out about litigation.

So the underwriter looks to see where you are now with ALL sources of income and debt vs where you'll be after the purchase  and applies their maximums appropriately.The brokers I have worked with would not allow the 43% DTI as in your scenario, @Justin R.So the key is to either buy a rental such that it does not send you over the maximums or reduce your other debt or increase your other income until the ratios work.  

I can support that my headache factor might be reduced with that option.

I suspect that it adds about 50% of cost to the value of the place so true cost is reduced.  

There's a lot of potential in this deal if I buy it right, because in addition to negotiating down the penalty for the code violations it is also way over assessed, and I can appeal to the tax board to dramatically reduce the taxes because it is outside of the statutory 15% wiggle room they're allowed on the assessment value. 

Same old agent routine (because it seems to work I guess), tell the owner the inflated value "they want to hear", then start blaming the market and trying to reduce the asking price a couple of weeks after listing it.  

Regarding the after pref split (whatever it is) is that additional interest so let's say they are making a 12% conc return instead of 8 and their principal stays the same or do such payments go toward  reducing the principal? 

It eventually comes out they negotiated a deal for reduced fees blah, blah, blah.Some places do not need PM as much but they tend to be in affluent residential areas with very little cash flow but stronger tenants.As a PM company you will have to GRADE the type of area and tenant your client wants you to manage.