However, it sounds like you inherited a long term tenant who did not have a lease and the property is at the top end of what they can afford.

The community is improved upon, someone has affordable housing and the city gets payment for the taxes. 

There are a lot of people who over pay for properties, but those are the ones who end up in foreclosures when the market turns and the rent decrease while vacancies increase and they can no longer afford the mortgage payment.

Considering all of the above, using the rental property analysis tool here on Bigger Pockets, I can afford to pay 150-160k max for this property.

This strategy works better when your selling widgets and can afford to sell some at a loss to gauge the market.  

Residential real estate is not as affordable as in the U.S.A. and lending (residential mortgages) is different.Transactions here are Closed using attorneys - as they are in some U.S.A. states.The biggest difference in financing is that we do not have long term mortgages in Canada.  

Affordable housing inventories change, laws change or are adopted, financing requirements can change, your money partner can die or change their mind, thousands of things can happen to effect any niche that you attempt to specialize in. 

Starter house this year which I would then turn around and rent when I can afford to get a mortgage on a better house next year.

Many investors lost their buildings a few years ago when oil spiked and they couldn't afford it.  

Why good idea - because you can afford it...Do you see how asinine this logic is, DL?