Next, housing affordability will always be an issue for those with lower wages. 

Most rent-ready or good area 2/4 units are not cash flowing at the prices they are at right now but if you find one in a lower income area and are comfortable living there - then you could have some upside there. 

You can pay points to get lower interest rates with > 20% down no insurance.

I would try to lower my resell price since he is probably motivated as a seller and has earned two or three times his original price.The age of the house and all of the weather it has been through does concern me as well as the basement condition.( I might be a little biased because I've been in Dallas,Texas all of my life (for 61 years). 

Having to "come out of pocket" at all makes it typical to justify it as a  good investment.It looks like the only way to make this work would mean you would have to lower the price down substantially. 

When I sold it, paying off that loan, dropping my total debt, lowering my debt to income ratio, moving from 2 mortgages to 1, only increased my credit score by 1 point.I will NEVER under how credit scores work, but I know they affect chances of getting a mortgage and interest rates you can get.

Because most of the closing costs are fixed, the percentage can be extremely high on lower priced properties.

any fee's you pay to foreclose are also added to your note.. and if someone took it sub too those folks generally wont have the ability to cure.. but maybe.. a lot of sub too in lower value assets is get in title for very little money then rip the rents.. knowing they will have one to two years in the foreclosure process so they get 800 a month for a few years.. do not pay anything on the property and walk away..

What is the time frame you usually take to see the trend?

This does have some limitations in that cannot stop them from doing partial payments, which could be a problem if they are facing eviction, etc— but if this is an issue then I guess can just return the money to them without jeopardizing your eviction time frame etc, as long as you have clearly said that no partial payments accepted.