Reason that it has attracted me is because they yield is so good and cost is substantially lower.

They also have lower closing costs. 

Technically I’m buying a like kind property worth more than the property I’m selling just my purchase price is lower than what the property is worth.

I have a lot of family and resources in Pittsburgh already and the lower prices there are a lot less intimidating to me than here in NYC.

This calculation also assumes that personal exemption and itemized/standard deduction weren't used to further decrease the income.It appears the gain will be a lot lower resulting in a lower tax. 

That said, I'm tempted to present a much lower offer to the seller and attempt a cash for keys deal with the squatters.

Instead, we may just lower our offer.Any words of wisdom or suggestions?

There are places int he Midwest however, that will give you bigger cash flow, but potentially more problems regarding repairs (older areas) lower class neighborhoods (depending on how cheap you go).Indiana, Ohio, etc has some opportunity.  

That being said, I don't plan on living in NY my whole life, but want to find a way to househack so I can lower my living expenses while I'm there.

You could charge a bit of a higher interest rate, require a decent down payment and discuss that you’ll be there to give advice and help, but they are responsible for the whole ‘business’.If you do your vetting properly and help them succeed, you could lower your tax bill and create a long term income.Maybe this is a terrible idea for real estate and/or you just want to dump the homes and walk away.