The IRS has said, since 2017, that the improvement ratio or $ value is what your taxes are assessed as, unless you have a really compelling reason to use a different value. 

As insurance woes grow over the next couple of years, I dont see this improving. 

Then, I'm also wondering about the challenges.

There's nothing left to cover expenses so you better have deep pockets to cover maintenance, admin, turns, etc.If you think you can quickly improve rents to a point that covers your expenses and pads your pocket a bit, then maybe, IF it hits your return threshold.If you're buying cash, then the mortgage is not a factor. 

FHA loans with low down payments are ideal for this.In the meantime, focus on improving your credit score and maintaining a solid financial foundation.

When there's tenants already occupying the property, there's often times different leases that were signed among the tenants.Additionally, renting by room usually sees higher tenant turnover which in turn causes more work for the PM.Other challenges to consider:- Disputes/conflicts among tenants (different personalities if a tenant doesn't know the others prior)- Occupancy limits- Splitting utilities (what if someone uses more water?)

Challenges?

I will offer this suggestion, If you can secure long-term tenants post-leaseback and consider future value-add improvements, the property could yield even greater returns.Also, keep a close eye on commercial real estate trends in Middle Tennessee, especially given the area’s growth.

At that time and place if you carried a sword you found yourself being challenged to duels.

Next in this environment you may be challenged to get $10k rent on $1.3m property.