The underwriters will be looking at similar property condition requirements (c4 or higher) of a conventional loan (no deferred maintenance or safety hazards which would affect value).  

Was the condo a good size unit and in good condition?  

Here are a few to watch out for:Property Condition: Most distressed properties need extensive repairs or renovations, which add to your initial investment.Competitive Market: With Phoenix's popularity among investors, competition for the best deals can be intense.Complex Deals: Foreclosures, auctions, or short sales are much more complicated compared to regular real estate transactions and usually require specialized knowledge.Tips to Successfully Navigate the MarketDo Your Research: Understand the local market conditions, including neighborhood trends, property values, and potential rental income.Build a Strong Network: Work with professionals who specialize in distressed properties-such as brokers, contractors, and legal experts-to make the best decisions.Assess Costs Carefully: Factor in the cost of repairs, holding costs, and any potential financing issues when evaluating a property’s profitability.Be Patient: Finding the right distressed property takes time.

For example, for this one, there are 5 4/2 in my area and they have close to the same condition as mine.

I would consider the tenant's past, as well as the condition of the unit, my local market, and other factors.

Quote from @Dylan Gomez: I inherited two homes, both were paid off one was livable, and I now live in it, the other was a rental in TERRIBLE condition.

And What other conditions/terms/costs do you calculate when underwriting the potential of a deal?

Even a single family builds can vary significantly based on site conditions and required structure/design.

However, it's a deal in a different state and during the Facetime showing, I could tell the tenants were gross and makes me think they don't care about taking care of the place or their living conditions.

Can you get access to the property in advance to verify the condition?