Most tenants are normal, rational people. 

By walking away and using the same money on a more stable investment rather than a rationalization of potential profit.

I can rationalize that clients make their own beds and that I am acting ethically but if I know the odds are against them and I offer the product anyway... that's seems unethical despite being perfectly ethical.

Does this sound like a rational approach, or do you think i am missing something?

It's that you'll inevitably at some point over the next ___ year be shoveling more money into the deal.Cash-flow positive deals are a little easier to rationalize because you're sinking "profit" (quotes intentional) back into the property with the goal of hopefully higher returns. 

Gagan,Great breakdown and rational way forward.

This issue that I am having is that my debt to income ration is too high for many banks to give out loans to help finance deals even thought my credit score is good.

This issue that I am having is that my debt to income ration is too high for many banks to give out loans to help finance deals even thought my credit score is good.

That said, it is common for buyers/sellers/agents (All rational parties) to misinterpret or disregard requirements of the lender for a short sale review/approval.

Is the rent to value ration on your present home even close to acceptable for a rental.As for your future plans I would not advise buying a new build to turn into a rental.