On the outside D type properties look like steals, but with the potential crime, turnover rate and bad tenant pools is there really good money to make?

There is some crime around the area but not on any of the 2 streets above or below.

For this reason I was considering reducing our contributions down to the bare minimum this year, and putting the money I would normally contribute aside for a rental investment.

If you give them the freedom to be candid, that will reduce your time wasted on candidates that aren't a good fit. 

In today's financial markets, seller financing can help move a property to close at a reduced cost to the buyer on closing costs.  

Increasing the deductible 5x only reduces the premium that little? 

This is the amount you'll be making payments on during the financing term.Interest only means the monthly payment you'll make will only include interest, not any principal paydown that would go toward reducing that initial loan balance.

I would like to reduce the term of my tenant’s lease.

Personally I'd keep rents around $1,150 to reduce turnover. 

This historically has produced an outstanding return as evidenced by your equity accumulated with only 5% down. prop 13: you are paying a reduced prop tax rate.