In the case of an asset manager, there are two reasons why we do this: lower the list price so we can accept a low ball offer and/or decrease price to create a bidding war.

Many properties in phx were built in the post-war boom and have cast iron or worse, orangeburg pipe.  

In order for me to proceed with a deal that may not completely fit my buyers lists’ criteria, it will need to fit closely with the 70% rule.FlippingProperties must be acquired at the 70% rule or less (at least until I’m more experienced and comfortable going a little higher)The deal must also fit my buy and hold criteria (in case I have to hold onto it)Buy and HoldThe property must be purchased at a maximum of 80% ARV - repairsThe property must be in an area where people choose to move to and not where people ‘have’ to live (no war zones)The property must be able to cash flow at least $200 per month per unitThe property must be likely to be appreciating at around 4% per yearThe first three properties will must each be cash flowing $800 monthlyFlexibility:I am willing to expand maybe an hour or so out (LA, San Diego, etc.) if deals are lacking in Orange County.

I have been absorbing them and have heard numerous episodes that address your very question.   

The approach my investor had was straight talk about the numerous issues he saw, some of which were not mentioned by the GC:  foundation, water damage that may have come from the outside, perhaps from the runoff from the neighboring property, rotted base boards in the corner (water damage) that could mean deeper issues.  

But in commercial real estate your risk is lowered extensively by doing proper analysis of properties and only moving forward with the ones that are numerically "Good Deals."

Of course, getting it under market is better, but to me, that doesn't preclude at-market deals if everything works out numerically.

Cost is $39,900 and will most likely rent for $700/month.I plan to have this house paid off in 18 months, at which point I will begin using the additional cash flow for future deals, savings, etc.The question is at what point, numerically, can I stop putting the normal percentages (i.e. 7.5% for vacancies, 10% for maintenance) away from the rent monthly, or at least reduce the amount to use more of the income for future investments?

But we all know most of these cheapies are in the war zone where no one with enough money to choose otherwise would pay the price these cash-in-a-flash 'TK' outfits are saying the property is worth.

Everyone's definition of war zone is different.