We look at lenders (so long as they lend in the asset class you are considering) as an additional line of due diligence (they deeply care about their money and they are likely more sophisticated than you are).

We purchased our laundromat in a safe, middle class neighborhood.

Beyond real estate investing, BiggerPockets Money has great episodes on how to avoid the middle class trap with your investments - ie how to structure your investment best so that they're not all locked up in accounts with penalties until you're 65. 

I know property managers in every state who use non-refundable application fees and it is the standard for every class of property and applicant.

Michael-  Great explanation of the property classes and appreciation vs cash flow outcomes.

Let's assume that the neighborhood is a C class and the median income of the city is greater than 3X of the market rent.Here are some of the considerations I've come up with so far:- Units are in need of renovation and capex is too high or not available- Unit quality is not the same as market - Seller is worried about losing tenants due to increase- Vacancy rates are high or filling units have been difficult- Rent increase would take multiple increases over multiple lease periods to get to market rate if seller is trying to retain the same tenant- Seller inherited property and just want to liquidate- Seller needs to liquidate quickly (financial burden, sickness, quick exit from land-lording)It seems like I might be missing a warning sign about a deal if they are selling with current rents that are under market; but again, this seems to be most of the properties I've underwritten.And in the same vein, what should I be worried about when purchasing a deal with under market rent with the intention of raising them after purchase. 

I love that these homes are in class A neighborhoods, I have seen this strategy work out for investors before but they were at least cashflow neutral. 

From a risk point of view, there is no real middle class and a very small upper class.

How do you know if a neighborhood is C class as an out of state investor? 

The lower the class area the higher the cashflow you should be receiving.