We eat mold in cheese, soy sauce, vinegar, beer, and have been doing it for thousands of years. 

There's a really good argument to be made for being really modest with the primary residence ("5 days a week, you're just eating and sleeping there, who really cares?")

@Steve Orluski I understand that part but what’s my liability if county says I have to replace it an I the one who eats it or the seller for not disclosing in permitted work?

It is nearly impossible (without lowering rent of course which also eats into your return) to keep an older proeprty occupied if you do not bring it up to date and address the issues that homes that have been in service for long periods of time have.However, the good news is that once you do address them and keep your property updated and performing, it is easier to have occupancy periods of 3,4 or ever 5+ years on properties.  

MO has their pie, they get to eat it, and come back for seconds and thirds. 

We grow and can a decent amount of our food and eating out is nearly non-existant (on rare special occasions). 

The neighborhood is roughly a B-, still has a little ways to go but surrounded by great places to eat, public transit, parks, and the highway. 

Be careful not to eat up all of your equity.

I understand the reason behind this is I have a larger P/I payment which eats into the cash flow.

The key is to structure the rental so that the depreciation eats up your taxable income.As long as you don't personally pull any money from the corporation, this will have no tax issues for you, although your corporation may pay taxes once the mortgage interest reduces over the last half of the loan period.However, in any year where you do pull money from the corporation, the corporation will pay taxes on its income, then any amount you pull will be taxed to you as Dividend Income (the famous Double Taxation of Corporations you hear so much about).I would also heavily caution you against holding property in a C-Corp.