@Caleb Heimsoth- very astute observation.

@Joshua Shull, a few observations before I dig into the expenses:How are you financing this?

Just my observations from a multifamily scope.

Conversely, it's also possible others have observed the same as you and passed on it due to the perceived/actual complexity/risk of changing it's use.

There were more tax officials in attendance, observing, than bidders!

Some of these sub-markets are small enough that investors can come in and shift the neighborhood, but unless you have the capacity to do that or are part of a team with that kind of capacity, you would just be hoping to get lucky and ride on some other investors' coat tails.I can't explain why some areas are street-by-street, but that has been my observation (and the observations of others) in many of the sub-markets.

I’m doing a lot of reading and observing.

I've also REALLY been wanting a rehab to learn from so I plan to learn and observe as much as possible (and contribute if they'll let me).   

Your observation that prices have been dropping and houses have been on the market longer is accurate.

This past year, we have made major shifts in our strategy based upon the market conditions we are observing.