The Albany-Troy area has far lower price points than NYC metro, and there are some attractive characteristics to those markets.  

As a contractor I always prefer a full gut but it does eat away the rehab cost and takes longer but no stress about plumbing, leaks, electric, lead paint and etc in the future.The patch up would cost less, fast timing, but then you are gambling with what's behind the wall and hoping nothing happens in the future.I assume most house that are purchase for BRRRR purpose are in distress/bad condition and old on some occasion.What rehab number would you go for?

So how can you foresee certain characteristics won't be good fits for you and your business ?

Sounds like you did not do any homework and its going to kick you in the butt and it sounds like you gambled on this one. 

Definitely up, so the gamble on rates cannot go your way.I had one ARM in the past, and it went my way when it adjusted, but only because the market collapsed.

@Harry Gamble The cost of insurance will vary greatly based on the individual property types, specifics, and locations.

The liquidity of a note is based on its characteristics which make is saleable: pay history, equity, borrower credit, down payment, etc; (of course this is assuming its Dodd Drank compliant, has a good chain of title, etc) and the liquidity of how quickly it can be sold on the secondary market is dictated by price, aka yield.

We are trying to think of some ways to target people who need to sell, but don't have the obvious characteristics that most investors target (run down exteriors, pre-foreclosures, etc). 

I was wondering:1) What are the terms / characteristics that make a note desirable?

Perhaps after some period of time with rates rising to and past the 2% market return expectations will indeed rise but that will be more of a lagging characteristic and not immediately impacted by the rate increase event when it happens.