The fact that it's an REO won't signify any particular change in repair costs, every property is unique.What will change the costs is flipping for rent vs resale (depending on the area). 

I'd be surprised if you can get a loan on a property that needs that much in repairs.

I would hope at this price point that your repair budget and a few other items are overestimated, which should make this cash flow number better.

Heating cost and surprise repairs not factored into that $2900. 

I used to live in DMV as well before I moved to NY, I live in Queens area NY and I am doing REI, I have a great money machine with no hassle property in Winchester NY, No need and repair and there are a good tenants who are already living there so there is no more money or time you need to invest aster you bought it, just start collecting money....Right now it is generating 12K+ a month.

. # beds/baths5. school districts6. historical neighborhood turnover ratios+ moreThe increase your monthly rents by decreasing your deposit, charging pet rent, tenant pays first $x of repairs + more....In today's market you cannot think like a 1980's property owner....

If you don't have savings for a down payment/ repairs you will find it infinitely harder to get started.

If any repairs need to be done you should be mindful of that, also depending on the state and tax assessment you may want to consider disputing that.

No, because like you said unless there is a significant price discount nobody would want it as an investment, your neighbor will get top dollar if they do the repairs themselves and list it on MLS. 

Here is one that I developed a few years ago when we used to bid at Florida auctions (Can't get formatting properly):1Property Search & Filter Search properties a minimum of 5 days in advance, valued between $XXK and $XXXK2Review Crime ReportsAvoid high crime and high vacancy areas3Determine ARVMake an informed decision of the Fair Market Value/After Repair Value based on comparables, tax assessment and physical condition4Enter Property Data into SystemRecord ARV, Assessed Value, Sq Ft, No.