I know the seller wants out but see if you can negotiate him paying for the demolition or any reduced taxes,water,sewer,maintenance bills there may be, that may help your numbers.

Reducing price even half doesn't help ..its the income property needs to generate.

My goal would be to bring in enough rental income to offset the expenses so that I can reduce my housing expenses as close to zero as possible.I've seen some scattered info on the web that deducting taxes from owner-occupied rentals is a bit different (square footage versus # bedrooms rented out versus pro-rata, etc).

Someone mentioned an S corporation which is a method to reduce that self employment tax- but really only advisable if you've made over $60-70k. 

So if a bank wants to reduce their exposure to that...then they will put extra rule in place.  

I have reduced the price twice now, and still no bites. 

However, I can find deals that will make $100-$200 in cash flow all day.My question is - would it be foolish to reduce my cash flow target so I can buy more deals?

When tenants vacate, I can adjust the thermostat up/down for vacancy and reduce utility use.

If you have a 15-year loan, you may want to refinance into a 30-tear loan to reduce your monthly debt service.  

Let her know that there is evidence of smoking in the unit and mitigation is underway, which will reduce her deposit return.