An experienced house hacker in a 4-plex who is also accounting savvy might give you a pretty good answer, but a CPA who handles lots of RE clients would be best.For FHA loans I think the PMI does not go away, but I could be wrong - most likely you will need to refinance at some point to get out of PMI.  

I hit the wrong button.)

I am looking for opinions of others to see if I am in the wrong or if my partner in a flip is.

Even though your not wrong have you tried apologizing, explaining and negotiating?

Real estate investing is good but remember if it can go wrong it will at some point and the quicker you accept and prepare for that, the better you'll be.

The buyers have determined that this property is in the wrong neighborhood for $1,000,000 and they wouldn't even buy it at $269,000.The key to pricing a property is knowing the neighborhood that it resides in.

But maybe I'm on the wrong starting point?

If I'm wrong, I'm sure someone will point it out.  

We need to listen to the marketplace - absolutely.Not sure who's right and who's wrong.

I purchased a VA foreclosure with busted boiler pipes and all kinds of stuff wrong.