Can I afford to pay an additional 5% of damages in case of a hurricane?  

He couldn't make it as neat and tidy as one of the installs his team usually does because he was trying to keep things affordable, which meant bending and moving the current pipe rather than just installing new.  

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.

Go talk to the town - zoning, building, and health departments.

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.  

FI with a huge buffer for law suits, life changes, health issues, etc.

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.