This is especially true in the over $200,000 market which is soft due to all the oil layoffs.Houston also seems to be the "in" place to be for investors from all over the country. 

I figure soft costs; cost to purchase, holdings costs, financing costs, cost of resale come to about 15% So that means all in at $425K is break even.

See also https://www.biggerpockets.com/forums/585/topics/269437-20-oil-and-non-houston-marketsI think if you wait, what you call "some great looking deals" may be some greater looking deals... since the leading indicators point to some softness in the near future.

A hybrid between conventional and hard money, or soft money basically.

Welcome and try to do some deals on your own and you will have a better odds of soft money or hard money or even conventional ! 

Mid-end market, $800k-$2M will have some decent gain while $3M+ market will underperform going forward.The data has shown softness in the $3M+ homes in Palo Alto since 4th quarter 2015, which coincided with the pullback in VC fundings. 

For example, if your total construction costs (land, soft+hard costs, etc) is $150/sqft and you can sell your house for $200/sqft, then you make $50/sqft regardless of whether you build 1500sqft or 2000sqft.But what I have to assume is that at some point, the payoff is no longer linear and I'll begin to hit diminishing returns.

Problem is that if I sell, I will lose $6k immediately for a prorated soft second mortgage from the Cherokees.

Information is valuable, you could also consult with owners (for a fee), show them how they can stop a tax sale foreclosure, how they can delay it, how much time they have.You could offer to buy their property giving them an option to buy back when they are financially able while remaining as a tenant.Hard or soft money loan will give you a great return on your cash.

Instead of making your mortgage payment to Wells Fargo, you are making it to the previous owner.