Owner occupied financing is going to come with more attractive rates and lower down payment requirements.

Any lower can be suspect, much higher indicates opportunity to improve NOI via value add.

I have excellent local contractors to do the work as well, and estimated repairs are around 15-20k keeping it on the lower to medium end.

IE If they wanted to invest $10k, I might agree to pay them 8-10% once annually, or something a bit lower semi-annually, etc.

Market starts to swing downwards (lowering price) 3.

They had a lower credit score. 

Assuming around 50% expenses and $840k PP you're at a 4.5 cap.I don't know your market at all but that doesn't sound like a great deal.It sounds like a brand new A class building so expenses should be lower though.You would need to get all of the actual numbers to really analyze it properly.

It depends how long the house has been for sale and whether or not it is listed on MLS, but if you offer expect to get countered lower. 

Since the now current market value is lower than than what I'm in it for, basically underwater till the market turns or I pay down the note. 

I usually run an 8% assumption on vacancy.Capex and Repairs at 7% are probably ok, although if you are putting $35k into repairs upfront you may have lower Capex and repairs on the unit for the first 5+ years.