I understand the California markets are generally considered appreciation plays whereas the out of state markets can offer better cash flow; I'm still trying to figure out what works best for my situation. 

You made a fair offer and should feel good about it. 

Would it be fair to eliminate a 1 year lease? 

Making LLC creation MOOT get an umbrella policy. save the money and hassle of LLC and revisit at 10 units. unless you just want to 'play business owner', which lots of people do.

Therefore, the unit itself is fairly relatively new and in good shape (water heater, furnace, and appliances are from 2009).

I assume this is a question you asked the previous landlord/manager for an application.I've never had anyone say they can't comment, but they usually play it pretty close to the vest and will say something like "they are in good standing."

He is trying to convince me to drop my policies on the 5 rentals and self- insure.  5 of my rentals have fairly new roofs, so they shouldn't need to be replaced anytime soon.

If its a fair deal , by the time you get an inspector , contractor bids , etc .  

If you want to play the negotiation game do as Franco suggests.

Hey everyone,I'm a fairly new investor.