There is a big difference between a loss on your schedule e vs how the property is performing from a lender's point of view(due to depreciation).

That thin profit margin could easily turn into a substantial loss.  

This allows for you to easily replace a contractor with minimal loss, should any unresolvable issues arise.2) Write a 48 hour fix and repair clause into your contract.

Market rents are $250-300/month under market for the area so basically the owner shows a small loss on their Schedule E with depreciation.Pushing the rents to market rate would make the deal a great one in the long run but what do you offer on the property now ?  

Ask for best an final and set a deadline.Hope for a little more from the cash offer and then accept it unless 1 and 2 go up in offer significantly making it worth taking the risk they fall out of escrow.Cash is and always will be king unless the difference is too much loss to eat.

They will all fight for every cent they can get taking a loss on the debt owed.A lender or their asset manager for the loan would usually rather do a loan workout to get performing again rather than take a big loss with a short sale or foreclosure.

With the 1M in cash, I would need to invest in something else to make up for the loss of rent that I currently enjoy.Math question, how much interest would I need to earn to make this strategy worthwhile?

As for seller financed notes the good news is Dodd Frank is being deregulated and as for institutional notes it's a supply & demand equation with a big factor being jobs & economic growth, but there's always people defaulting due to job loss, divorce and medical.

And in my personal opinion, you should never bank on appreciation to cover your losses. 

Looks like a monthly loss based on quick numbers.