After you're done with that you can always buy a single family to start a family in if you need to.I think it's the best strategy to get started and make a big change in your financial position!

You don't want to be in that position. 

Positive previous landplord reference.4.

The rent doesn't meet the 1% rule but the potential for positive cash flow is there. 

After running numbers i'm looking at around $780/month in positive cash flow .The seller owns these properties free and clear and wants 5% interest and for me to pay any transfer/closing costs, i'm estimating $1,500.My question is, how do you pay down principal on a deal like this?  

Consult with a knowledgelable agent in your market to see if they have a positive or negative affect on your property value. 

The rent does not cover the mortgage, not even close, so subject to isn’t in question.Without much equity I’m assuming I should not pursue and tread lightly w/o further damaging the position the landlord is in?

Well there's the law, and there's putting yourself in his position.

Your friend/relative will be 1st position lien holder. 

I am trying to acquire a property.  I have 10% cash to put down and can get a bank to cover 60% of the Value,  how does someone obtain the additional 30% from open market funds?