I understand the amount decreased is just added to the end of the loan.

Reason being is that they could up and leave one month which will decrease your cash flow without much ability to prepare for it. 

As the market adjusts do you see this causing rents to decrease and if so what is the strategy for investors when this happens? 

leave equity alone would be my take on this one or your payment will require pmi again and cash flow will decrease again.

Overall unit sales have decreased in the Bay Area because of lack of inventory but price per sq ft is still on the rise!

Naturally your mother should have noticed a smaller (if non existent) monthly rent roll, if rents did decrease, and they were still taking money for that escrow.

iv'e walked in houses that are out of level ( in a hall way ) by at least 2" , i didn't buy that one, but that you can feel, as you lean against the wall walking down the hall way - just kidding. what you need to do is find out the cost to repair it and determine is it worth putting say $8,000 towards something that may only decrease the value by $5000 in some buyers eyes or by the appraiser.

So yes, your lack of routine maintenance caused the flood, unless your flooding a/c has another unforeseeable cause.

If approximately 25 units (47% of 53 units) are vacant simply because of a need of updating, immediately after purchase, why not immediately decrease the rent on say 15 of the 25 vacant units by an amount (e.g. 10%) to increase your short-term cash flow by enticing tenants to overlook some of the required renovations for a slightly lower rent. 

@David Hayman, I'm not an accountant, so you should talk with a local professional, but if depreciation and other expenses cause your rental property to have a loss, then you can use that to decrease taxes on W2 income IF your income is below a threshold (it starts phasing out over $100K in income I believe).