You are better off with a lower as is offer

In 2008, I noticed that his area did not really take any major hit to home price, maybe stayed same or bit lower, during the recession that hit silicon valley.

In addition, higher costs of living will continue to drive the population to lower tax states.This is really starting to make me consider investing out of state.Looking for some investor input.Thank you

I am wondering if I need to lower my asking price even more, but I don't believe he is super motivated and will accept a low ball offer.All the homes were built around 1950 and range from 850-1100 Sqft.

For government loans, this is typically lower however, you would have to pay a premium up front and carry the insurance for life.

After tax contributions are preferred when you are in lower tax rates. 

That is why the property must be distressed to justify the lower offer.  

The returns are of course lower than selling $1m+ houses and condos, but the volume is high.

California has a wacky law where assessed value for property taxes can only increase at a very limited rate (~1%) so most people are locked into property tax rates much lower than their current home values, so this favors purchasing rather than waiting.$4300/month is at the high-end of affordability for me, so seems like the only way I'll be able to purchase a home of the quality/location I want is to liquidate (at least some portion of) my real estate portfolio.

The principal for the property currently sits at about $86,820, with an Escrow balance of about $850.This is obviously a very bad deal as it is; my question is what would be the best option to drop the mortgage every month in order to get a positive cash flow, either by refinancing the mortgage, or getting some other loan at a much lower monthly cost?