Now those that are negative cash flow or barely breaking even might be in trouble if rents do go down. 

I've done it but my flips take a little longer since I'm a weekend flipper. 1 cot, 1 box of clothes, and just the bare minimum, saved myself some $ and its my flip only so no partner to worry about.

There goes any incentive to improve properties beyond the absolute bare minimum.

Our deal has plenty of issues too (AE floodplain and more), which make the price right for a BRRRR in a B neighborhood and scared away juuust enough competitors for us to be in the running (just barely, for us!). 

Bare bones outside that.

(Excuse the shaky panarama the bathroom is barely bigger than a bath mat)

I do think it's possible to get a property cash flowing here, but just barely, and there's no appreciation guarantee, AND there are some extra costs that I don't have at my Portland, OR rental (snow shoveling/plowing and lawn maintenance are both *required* by the village council here, I've come to learn, and if you don't stay on top of them the village will fine you). 

But if someone with good intentions started investing in those communities, say, starting a business that employed local residents, or better yet, opened a grocery store, inevitably real estate prices would increase and the ones who could barely afford to live there now would be priced out.

@Derek TellierSome questions I'm curious about:Are you able to contribute more to 401K than bare minimum to collect match ?

The major problem I see here @Leland Smith ,  since you opted to self-perform by pulling the permits under your name and not hire a Licensed GC you bare responsibility for what happens on site.