Again, a rotation into real estate seems rational if confidence on the currency/bonds goes.  

was it because debt to income ration was too high and the bank wouldn't give out further loans......also, how are the interest only payments a write-off? 

They are very rational and numbers driven. houses above $650k don't move that fast. 

It is highly dependent on your neighborhood's density.Next, figure out your FAR (floor area ration).

Start training yourself how to analyze and justify and rationalize every thing you do and so long your reasons are legitimate, you are fine!

At first I thought this would be great to do business with other business people and just keep it professional, no crazy tenants with outrageous  issues, just two rational parties with common business interests.

It can't be rationalized by using emotions...it has no emotions. 

If it were mine, I would (probably) make the interiors up-to date modern so that it is not super obsolete looking in 10 to 15 years.I would do them as they turn--one unit at a time--and spread the financial hit out over time (both the added turn time and the added out of pocket).I would also check the water heaters for age (service life) too, as well as doing any electrical upgrades when the walls are open (adding additional GFCI outlets or etc...)My rational about this is would be, can the place get market rate rent simply by painting over the paneling (which seems low end to me), and what is the close in competition offering and getting in rent?

As you said, foreclosure folks ar enot rational.

Sometimes its hardest to rationally present helpful information to those who you care about most deeply.