Cost for a small 2/1 could look like this$2800 to 3500 for furnace and duct, it depends if you want it sealed, spiral, rectangular,  unit efficiency, etc.$300 for electrical run$50 for CO/smoke detector$300 for gas$600 to build new closet for furnace door, framing, drywall, etc.$800 to provide new soffits, you don't have to do this. 

But if you're in a distressed community that is spiraling downward, it might signal the opposite.

Property management, reserve funds for unexpected repairs, tenant issues, the market might be hot right now but in 3 years it might be in a downward spiral, etc...Not trying to say that buying for the purpose of renting is a bad strategy, just saying that there is a lot to consider before getting into it.Some of those reasons is what has pushed me to bring my clients mainly properties that we are going to either tear down and build new or remodel.

Now, for anyone who is a reasonable landlord and who follows the rules, shouldn't have too much to worry about, but as I've warned others before, I've seen first hand not just once, but several times, what happens when a larger scale landlord gets into hot water and then ends up in a downward spiral, which for one not close friend but someone I've been friendly with for nearly 20 years, meant him losing literally EVERYTHING, except for money in an IRA or other retirement account of some sort, that couldn't be touched.

Once the property gets tight and has to skimp on repairs, maintenance, marketing, etc. it ofter enters a death spiral that is very difficult to recover from. 

Deflation starts a death spiral where nobody buys because they can wait for lower prices.With deflation the debt proportionately increases.

In the same way that leverage + price increases led to a spiral of appreciation, I can see price decreases resulting in more and more mortgage defaults that create a downward spiral in prices.

But, you're right that entry-level farming is very difficult to get into, which is why local ag is in a death spiral all over the country, at the same time that the city folks are begging for local organic food and willing to pay top dollar for it. 

In 2009 it was very challenging to get a loan on most RE sectors and that spiraled the decline in pricing even further.

The exact algorithm is a trade secret, but it makes sense... someone inquiring about a bunch of new credit cards a month is probably on a downard spiral, but someone looking to buy real estate is probably doing quite well financially.