Here's why....The sub60k properties had so many hidden and unknown problems, there was real risk associated with what I might find later after buying the home.

., not from seller)1st loan - recorded date: May 2005, loan amount $650k, 30 yrs adjustable rate;max. rate 12.6%, current rate – unknown, adjust every 6 months.2nd loan - recorded date: March 2006, loan amount $77k, 20 yr loan, assume HELOCAccording to the seller: total mortgage payment $2200, insurance $100, property tax $700(However, I did the calculation, the payment on the 1st loan should be at least $3500, assume at 5%, seller will provide more information on the loans later on; my take is if it is adjustable rate loan, forget it; she told me that it is a fixed rate loan though; for this discussion, assume the total PITI is $3000)According to the seller, the total mortgage owed is $680k.Today’s market price is around $620k, during the last peak, it was around $720.When it peak this time, I expect it to be higher than $720k (based on the information from the nearby market, some area has already gone higher than the last peak)Seller is willing to sell it subject to.The roof needs to be replaced and probably some sewer problem which costs $7k to fix at most.So the out of pocket $ to buy is < $20k for now and it won’t case flow for the first few years, assume rent go up after that, it will.My plan is to find a money partner to put up the money to fix the roof and the sewer problem and hold on to it for at least 10 years and wait for the equity to build up, should have at least $300k equity or more in 10 years and sell at that time.

This is why if you buy occupied you have to price in unknown damage they will do before they leave and lost rent and possible cash for keys to get them out.

However, I don't like the utility unknown and the fact you have no real control over the tenants behave and therefore how much those could be.Like I said, I think your utility estimate is low, but even at that, it's almost 2/3 of what I would expect your monthly P&I to be at or near the target price.

The actual construction costs budget I did not go too far over on, it was all the unknown and unfortunate circumstances that lead to such a large over budget.

That’s the unknown variable in your post.Also, can you clarify your strategy with these lots?  

Otherwise, unknown costs will occur that you did not see coming. 

The only choice we had in the matter was to evict HIM for breech of contract which would include all unknown occupants.

Instead of how much down and an expense that's 2.5% of an unknown, we need to know the age, condition, class of area and the market cap rate of that class. 

Paraphrasing here, the general conclusion from the guest, who seems to be a well informed source, is that a negative interest rate is viewed as the best option compared to the potential alternatives-ie, taking a guaranteed loss vs unknown loss in a different investment.