I believe the loan would be in the "Loss Mitigation Department"?

They can deduct paper losses without spending money.People should deduct everything they can legally deduct.

I fear those areas though, plus minimal profit is to close to loss.

Differences in value are made up when you sell via capital gain (or loss).

Some costs such as commissions and management fees you can charge them at fair market prices, so after the property is sold, distribute the cash in the following orders:1)  Return the initial investment capital back to investors, you 10%,  partner 90%2)  You take 3% buy price + 3% sale price as commission , plus 10% of rent as management fee 3)  Now see how to split the profit:  think about how much of your time and effort worth (A), and the potential profit (P), A/P will be the minimum share you will get.If there's any loss, you can take 10%, partner take 90%.After you work together long enough, have mutual trust, and know the potential profits well, you may find a simple split like 30/70% .       

Although those have some nice thermal mass properties.Windows and ceilings usually account for about 1/2 of energy loss from a construction standpoint.

Job loss, unexpected bills, etc...

Personally, I'm of the opinion that you shouldn't buy any property that doesn't cashflow, at least if you're early in your investing career (like I am) or don't have a number of cashflowing/appreciating properties to offset potential losses while trying to buy only for natural appreciation.

While landlords hate to drop rents, and resist it like the plague, make no mistake that during a downturn your income will fall even if you don't drop rents.Vacancies will increase, credit loss from non-paying tenants will increase, eviction costs will increase, you'll have to offer concessions like free rent or temporary discounts to attract tenants and keep the property full. 

It just seems a little off that the owner that bought last year would be selling a property like that with that much of a loss in a hot market.