Can you give more details on your numbers, purchase prices, rehab costs, time to complete rehab, ARV, monthly rent?

Time and practice will still teach you as you do deals but it will help you understand what things costs for the size of the property 

if there is appreciation, but you wouldn’t sell your current home tax free and buy a neighboring home to rent out, (There by raising your cost basis for additional depreciation and lower capital gains tax.) then it probably doesn’t make a good rental property. . 

If you are in a state where eviction cost is high and it is tenant friendly you may need a higher credit score to offset default risk and eviction cost.If you are in a landlord friendly state where it is easier to get non paying tenants out you may be able to handle more none payment risk.  

It will cost less than $150,000 and will need moderate renovation work.

He's changing the terms of the agreement, and you can choose to accept it or reject it.I don't think it's fair to pass this cost onto the tenant just because you are unwilling to stand up to the contractor.

At this point since it's after the fact while not totally correct; you may explore adding the missed asset/basis amount as a selling cost to just reduce your gain. 

The repair was extensive and costly, requiring excavation (about 3x6 feet) to replace the broken section and clean up the mess.

This will make it a lot easier to manage, will cost you less than buying on the market and typically you can get 1:1 rent returns.

Was going for the best cost-of funds (lower rate)