This kitchen is a battle you can choose to confront or sidestep but don't blow money trying to do half a job and get no return.  

I allotted $20k for contingencies (could be considered very lean) so this would blow that amount before we've even started. 

I'm certainly not advocating holding your rent @ $400 when the market is @ $700, but take into account the NET amount you are making on your tenants when deciding if its worth it to trade a 3% rent increase for a possibly broken business relationship with your client.

Over the last few years I have seen both states blow up in most areas.

Few coaching programs were advocating aggressive Bridge debut over the last 2-3 years, and these are the ones that their members are now struggling with maturing debt. 

If I were to take the cashflow I made per year and the equity capture at the buy - the equity capture would blow it out of the water in most cases.

If it is you and you go overboard to acknowledge the short coming and make it right than the guest will most likely forget about it and move on, if you blow it off the guest will make it a big deal and a big headache for you".

Your cashflow will rarely outperform the S&P but your overall return will generally blow that out of the water.

Not ideal and not the route I'd advocate, but bearable.In other instances, in which a financial/tax service provider promotes non-compliance to unwitting consumers, the potential costs can be astronomical to all clients.Consumers of financial & tax services should always seek - and get - total transparency from their service/product providers.

Makes big sense to them to pay good money, but for you as the investor wanting to resell it, you couldn't pay that much and make money.Florida....just being devil's advocate...wouldn't you want to buy in a place that has high demand and the chances of selling or values better, than in the little town I described above where there is no demand and no growth?