The appraiser will make a note " comparable sales in the market do not warrant a higher valuation or appraisal value," or "lack of comparables similar to the subject property,"... on and on....This is where theory differs from reality as I've seen multiple appraisals where the borrower/investor did not get their appraisal target or ARV they were looking for and ultimately had to bring in cash to buy/pay down the loan to 75-80% to complete their refinance.Looking back I would attribute this to inaccurately calculating ARV, using bad comps perhaps, over spending on rehab, and or market conditions weren't so great so new higher priced comps weren't closing fast enough to become "comps," on the appraisers report.

On the one or two occasions where we have had an issue with housekeeping, a call to the guarantor (Mom or Dad) to explain there would be an additional charge for our cleaning service had the desired effect.However, student rentals tend to be more hands-on than our "young professionals" - we pass through each unit about once per quarter (air filters, smoke/CO detectors, etc) which allows us to stay on top of cleanliness and repairs (which, when attributable to the tenant, we invoice right away).

They will take comps and adjust their appraised value upon differences in the attributes Bob mentioned

I am sure though that there are still certain property attributes that will drive appreciation regardless of exactly how much home prices rise overall.

As long as the transaction/cost is identified and can be attributed as desired by the client, that is the key.As a PM, we don't usually have the full perspective of a client's balance sheet. 

When renovations/repairs are done afterwards, then capital improvements are depreciated.Since you have a duplex, only half of a shared cost, or whatever can be attributed, can be deducted on your SchE. 

The stategy in of itself is fairly rare and attributes to investors working to bring deals to the table well below market value.

We have the opportunity to sell one of the properties for the full amount of the loan, but, since any attributed appreciation would be a short-term capital gains, are trying to best understand the implications and potential structuring options. 

since you can't predict what the market is going to do is there any other reason or attribute of the home that would make it worthwhile to hold on to? 

You’ll pay that, plus whatever was deferred from the 1031, attributable to that property.