As such, I agree that the maintenance costs could be much lower.

Here's what it looks like:Purchase price = $300kRental income = 4 x 1bd/1ba @ $500 , 2 x 2bd/1ba @ $650 = $3300, seller thinks  1bd's can go up to $700 and market research supports that Taxes = $200/monthEstimated expenses = 1300/month (10% each for vacancy, CAPEX, and repairs and $200/month for insurance)NOI = $23k at lower rents, $33k at higher rentsCash flow = $500 at lower rents, $1300 at high rentsThe property is in a C neighborhood that is gentrifying.

In 2017 when you renew the lease do you have to lower it to $1142? 

Maybe I’m not understanding things correctly, but wouldn’t the risk of a major fire coming through again be lower since much of the old kindling has now been burned?

Why not try the numbers at lower offer prices to experiment with the numbers you want/need and figure out the most you are willing to pay for it.

They are living in a market they are priced out of and look to Midwestern cities for lower entry prices.They do not have the time, ability &/or desire to be an active operator in the business of rental real estate.

But I declined and said the lower offer stands .  

Then you do one of two things, lower expenses or raise income.

If your score is, let's say, 775 in Credit Karma, you can expect your score in the report run by a lender to be 25-35 points lower (or more strict), like 740. 

Above market rents may be achieved by tricking out a unit to the 9s and attracting a tennat with more money than brains.Charging under market diminishes the value of your property and attracts lower quality applicants.