My annual average occupancy is 38.9% grossing $90k with a 59.2% profit margin.

Lenders would be primarily concerned about the interest-rate risk for longer term loan products, and thus use ARMs to hedge that risk based on a prevailing index + margin (Prime, SOFR. etc.).

If you are upside down by a large margin on that, then you have broke the lessons of real estate 101.

Keep in mind I dislike the slim margins, tenant damage and general under utilisation of money invested on SFHs if your intent is to generate maximum passive income.

As the market shifts, sellers are still asking over market value for their houses, leaving no margin for rehab.

With the new moratoriums on evictions and politicians making up rules as they go we can’t afford to take chances like we used to and it is ultimately the marginal tenants that will suffer finding housing.  

There are many different versions or variations of active investing (wholesaling, buy and hold, BRRR, short term rentals, and many others), but what the reality TV shows do not share are the razor thin margins, the cutthroat world of acquisitions, and the many unglamorous aspects of the business that make it very tough for the average active investor with a W-2 to be successful with this as a side hustle.

Builders continue not building starter homes, and focus only on whatever they get the absolute highest margins on?

I assume that you have an exit strategy that justifies the purchase since your cash flow even after the rent increase and repairs is only marginally better.

On a relatively low priced property, your margin for error is a lot smaller, and an unanticipated repair expense could tank your chances of success.Obviously, you can't offer the $35,100, because there will more than likely be repairs needed.