There are a lot of variables to consider so it's impossible to say if investing in one of those other markets would have been "better".However, I think you could make a stronger case that you have been (or would be) more successful with your real estate investing in Chicago compared to other markets.

Basically if there is no "living room" and there are no comparable properties with similar square footage and bed/bath count in your area the property becomes difficult to comp or sell and lenders will not be able to use it as collateral for a loan Excellent point.

Additionally, we are digging into BLS data to compare already existing data.

Comparing what was promised to what was delivered lacks context. 

So, that example is not relevant/comparable.

As others have mentioned, the rate will be higher compared to a loan with a 5 year prepayment penalty. 

I also do a lot of market research in each of the markets we operate in to understand how much comparable properties would charge.

A really nice home with some extra touches (a little granite, better flooring, nicer paint job, nicer cabinets, etc.) compared to the area will make potential tenants fall in love with the place.  2) Tenants that bring or can swing their own appliances are more financially stable (or just stable in general, ha!)

As @Carl Millsap said it depends on how much more in rent you're getting compared to the costs of renovating.

@Sam Dal Passive activity gains, such as those from a sold multi-family investment, can only be offset by passive losses, including accumulated ones from prior years.