I tend to stay away from C class and want to make sure this is the right property to improve.- Gratefully

The community is improved upon, someone has affordable housing and the city gets payment for the taxes. 

I go there for a conference every year and there has been a noticeable year over year improvement with more happening and vacant commercial space filling up.

If covering water isn't typical for your market and the units are in demand you could consider switching this to tenant pay and improve the property's performance. 

But I think it would be worth it.My goal for this are:-Effectively clean up area and improve the neighboring area-Make some money by packaging a SFH or multifamily apartment complex/developmentHere are a few questionsWho would I talk to about re subdividing?

Building constructed in 1980Present loan value appx $77k on a 15 yr note with 3.375% interestP&I pmt is appx $602NOI 2014 was $11489NOI 2013 was $5142      (spent around $4k on updates/remodeling)Appx $27k by my calculations of capital improvements needed in the next 5-10 years to increase the value of the property, properly maintain it, and keep it functionally up to date in order to attract higher quality tenants (located in a b grade area) (I'd rather have more invested to have higher quality tenants - have my own reasons for this line of thinking - willing to sacrifice a bit of profit to have good people)- Redo Kitchens- replace doors and all base trim/casing (more for my taste and would help the place rent out even quicker)- 2 escape windows installed for basement bedrooms- Concrete work needed on patios and near front of the house -- need to be done in the next yearProperty based on comps in the immediate area and a tight supply of decent duplexes here is $175-210k or so.  

Can I deduct this as a repair or is this considered an improvement. 

First, we need a bust to occur so there is something to recover from.So in the mean time, I think people buying for cash flow and getting hefty returns in markets with improving employment, growing population, and low vacancy are probably making a smart move.  

A lot of the stuff in Phoenix was bought, 1 or 2 years ago, no improvements were made, and now they are trying to sell for $50-60,000 more than they paid.

;-)   http://www.myfourseasonspainting.com/Dexter Tillis of Little Business Home Improvement is my favorite handyman - http://www.lbimprove.com/