Traditionally, anything more than a $50-$100 increase is considered high from my experience, but with rents increasing more than normal over the past few years along with inflation it's not unreasonable to push for more. 

Seems like your lawyer tenant is being unreasonable.

Searching for markets with properties that meet or exceed the following criteria:- cash-on-cash return of at least 12%- annual appreciation of at least inflation plus 2%-3%- low crime area- strong school system areaAbove targets to be reached after provision for the budget assumptions below:- 10% vacancy- 10% of rent for property management fee- 10% of rent for CAPEX- 5%-10% of rent for general Operating Expenses- 1%-3% of property value for insurance- 1%-3% of property value for taxes- 10% of rent for misc. expense retainer- debt service on 80% leverage Are my expectations unreasonable, or have you experienced/come across properties in locations where I could achieve these targets?

Add in the other considerations, 1% for extensions and their unreasonable request to put a lien on another unrelated property, and this is unreasonable. 

I think it is completely unfair and unreasonable for him to demand the full amount back and he is trying to threaten me and intimidate to do so. 

Looks like there’s a clear verdict here and that I’m not unreasonable.  

It's not unreasonable, especially if you're going to be offering less than half of list price on everything, you'd be lucky to get 1 out of 50-100 offers. .

. - depending on what part of New Mexico you're looking in (and who you're buying it from), this number does sound on the cheap end, but I wouldn't say it's unreasonably cheap.

Plus, with a purchase price of 190k, the 2% rule would dictate rent of $3800, which I think is unreasonable.

I'm not that familiar with your area but I would be weary of venturing out of state (as in it's unreasonable to travel to a unit in a day) unless you've fully exhausted all the markets within, say, 100 miles of you.