In leveraged real estate investment, G/L is the result of:Surplus cash flow if anyPrincipal gain on your mortgageValue-add play/market inefficiency at purchase or afterPrice appreciation/depreciationRent appreciation/depreciation (and raising rents at purchase if applicable)A prospective property should be deemed attractive if under a well constructed model and across a certain time period, it optimizes total income from the above better than other prospective properties.Note the flip side of leveraged cash flow is leveraged CapEx, where a more accurate assessment of the latter may significantly reduce your projected cash flow.Principal gain should be considered in relation to cash flow, it may be an "almost certain" gain in the long run only in strong markets, though still is an unrealized gain and remains unimpactful until the property is sold or the equity is extracted in some way.

This implies an average SFR purchase from 3 years prior would have had to be on the order of at least $500/month negative to not to have cash flow (excluding for a refinance that extracted money).There is a big difference between initial cash flow and actual cash flow. 

However, you then say that over the past 2 years, the SFH has appreciated by an additional $65k (either due to your remodeling or general market appreciation or both).If you hold on to this investment, you really are passing up the opportunity to extract $100k (omitting transaction costs and income tax due for simplicity).

I think it depends on how you define work...If you mean that you will be able to extract all of your investment cost, I have been finding that challenging even without a downturn.  

The low appraisal combined with the low LTV typically prevents me from extracting all of my investment.

Are you looking to rehab and refinance to extract the equity right away?

Consider having your listing agent lean on the buyer’s agents showing the property to extract that information from their clients.

Why sell your asset if you have a way of extracting some capital back.  

While that isn't always the case depending upon the condition of the house, it is a common thought process.It also is just long enough to hopefully have had some equity build up via appreciation and loan paydown to extract some equity. 

Maybe but I question how many purchases I could have made if I needed the purchase price to be low enough to perform an extract of the purchase costs and the rehab costs.Therefore, I am not surprised that you find it difficult to extract the purchase and rehab costs (I also find this difficult).