In high property value areas, the SFR rental will not even cover the mortgage and there's negative cash flow. 

Many of the worst loans; negative amortized, balloon payment loans, etc were presented as viable  loans to people who could not afford them.

I have a single family home that went cash flow negative during the economic downturn. 

If you're looking to purchase a rental, it would be good in the long term but will probably negatively affect you financially at the moment and with paying your debt.

Over Leveraged is when you have any property that has negative cash flow, and is leveraged.

So I am wondering how real estate produces a negative taxable income or if i am missing something.  

You can keep down on the trouble tenants by implementing and enforcing rules that deter negative behavior.I have another client that has a boarding home for "ex-prostitutes in recovery".  

But I calculated a 97.5% LTV in my head, and it led to negative cash flow.  

I have been in limbo about getting licensed because of the negatives I've heard but I am thinking with added knowledge of RE and the unknown positive possibilities through it that can arise, why not?

All we can do is help provide the possible pros and cons to help you see the overall big picture and potential impacts, whether positive or negative!