We're under water on it.  

By your logic, if I use a HELOC at 7% and my house only appreciates at 4%, I'm going to be underwater. 

Some are underwater with even higher rates when agents told them to wait till 2025.

So the risk of being underwater and over-leveraged is generally the standing from start.

Another investor, that I know had 4 properties where he was under water and the mortgage was about 2X the new value. 

AZ MLS listings are frozen and there are plenty of examples of new listings now under water from a 2022-2024 purchase price.

I am considering buying, renovating, renting, and refinancing (BRRR) a property in the Albuquerque area and have found a single-family home that appears to be condemned. My real estate agent sent me a report that show...

I was there in the great recession of 2009 and had a deal where we were totally underwater and bleeding cash but 6 years later sold and returned all capital plus a profit.

Relaventhomes is the name its in Oregon really nice stuff.. he did an 8 plex but it did not sell and I know its underwater.. but he has the dough for these type  of ventures he wanted to do it for environmental reasons was his first motivation. 

The first alone in your example is at a 94% LTV Loan To Value ($375,000 1st divided by $400,000 value) and the wrap mortgage is underwater at 101% LTV ($405,000 divided by $400,000 value).