Some would argue that it is still a decent deal to  buy something with more than X in negative cash flow as you are paying down the mortgage and hopefully accumulating appreciation. 

The only way you could argue this is that you can prove 100% beyond a shadow of a doubt the owner tricked you fraudulently.

I think most people would want some sort of ownership in the company for loaning that amount of money (think Shark Tank on ABC).  

On the other hand, one could argue that if you choose a good real estate attorney to draft your loan docs and guide you through the process, the money is just as well spent there.)Another thing is that, as a guru Robert Kiyosaki (Rich Dad) is "information light" (on specifics), but I do feel his books have a number of "philosophical gems" (ways of looking at things) which are extremely valuable.

Perhaps if there rental rates were higher in that area, you can argue for a lower % so the notional is average.

I had one guy that argued with me that his assessed values from the city were still going down, so he wanted to wait on purchasing another place.

He references it in his ABC's of Real Estate book. 

@Jon Holdman  department of real estate in most if not all states do not get involved with EM disputes.. if the EM is at title.. then simply do not sign the release.. money then is stuck until buyer and seller finally agree.If they never agree the title co. interpleads it to the court for disposition.. then both parties have to hire lawyers to go to court and argue who should get it.. its at that point both parties ( for the average 1 to 2k EM realize legal cost are greater than the money they are squabbling over and agree to split it... that's whats usually happened in my deals.. but like you say if its released to seller.. this is a tough one unless you have disclosures docs signed by seller that are simply untrue and should have easily been known.. problem again is with em the cost to hire attorneys does not justify how much is at risk MOST of the time. 

I would agree with some of the previous statements as well, I think the majority of people are unfamiliar with the process and renovating seems simpler to most, though I would certainly argue against that once you understand the new construction process.

Without arguing cap rates or other nomenclature, the real ROI (or IRR) can be calculated on the bond vs. the REI investment.