As a SFR investor for over 15 years I have been wrestling with this question in the past, because it feels like you should upgrade to "bigger".I know for sure that I would not enjoy the ownership experience that comes with a small 4F, because in Milwaukee that typically also means lower income tenants. 

@Travis TimmonsI had the same reaction as you did, but I held off on posting since I don't yet invest in STRs (I'm all LTR so far, and looking into my first MTR).Buying an STR "to offset income" makes me nervous as well...

Besides the obvious credit, background, and income verification.

I would slow down and think about your BUDGET, what you can get for $30k, and how you can increase your income.

Co-living, on the other hand, mitigates this risk by creating multiple income streams.

i wish i had better news for you but it's probably not feasible in the short term to replace your W2 income with rental income. 

I am assuming that this means I can deduct interest paid to original lender and report the interest I received from buyer as income like Ashish mentioned? 

New agents may struggle with periods of no income while waiting for deals to close.Solution: Budget wisely, build a financial cushion, and prepare for slow months.

I would prefer to sell the property vacant or the easiest less stressful way as possible, however I was advised that could deter investors buyers interest as the rental income is a one of my strong selling points.I am open and would appreciate any thoughts and/or suggestions from fellow agents or investors alike.Thanks in advance;)

Interest income is interest income, unless you decided to roll some of the current cash into a self directed IRA at which point your interest income would be deferred for a later time and allow your funds to grow tax free.