If there is only a slim margin on the rental side then I would say don't do it.

The profit margin at that would have been around 30k to 40k.

Disadvantages - higher tax rates (income is taxed at your marginal tax rate and not on capital gains which is a lower rate).

So to get to a $40K rehabbed home they either have to buy it for $5K AND make no margin on the sale or cut a lot of corners during the rehab process.

I cant pay more than that if I do my profit margin is razor thin.

On top of all of that, you would be able to take your $100K cash and purchase a solid 4 plex in a B/B- class neighborhood that will cash flow, and provide you with mortgage pay down, or you could purchase a higher returning residential multi in a more marginal neighborhood and try to achieve a higher return with something that is possibly value add, so now you have options for your investment.  

the guy with the 5-25K car or the guy with the investment of tens of thousands of dollars, your 'collateral' is not collateral at all if its the trigger that causes the Tenant to lash out towards you through your much more expensive investment.Of course all of these are extremes, my point is that just because you can do something (big if) does not mean you'll come out on top, you may very well still loose in regards to protecting your investment, reputation, cash-flow, profit margin..... get my point.

There are very few (only one that I know) that will delay an appraisal until after funding, but that has it's own criteria that is very atypical for the average borrower.Look at it this way, you want to ensure that the value of EACH property is where the margins make sense for both you and the lender.

My experience is maybe some emotional motivation but I feel if I can provide improvement to the area and give students a better place to live and maybe sacrifice some margin,  I am helping to improve the community.

But you will get people looking at a worse property to achieve a percentage metric than translates into very little marginal income.Tip: If $20 per month represents such a material change that it would sway a buy/no-buy decision...don't get into real estate :) You will have WAY bigger issues over the years to contend with.