It was a very thorough analysis that pointed to broadly good news for the housing market between now and 2018Unemployment at 5% and declining, core inflation at 1.7%, accommodating monetary policy, consumer confidence at 96, 2.5m new jobs being created each year, 1.2m new households being formed each year and interest rates at a very cheap 4-5% are creating a goldilocks scenario for housing.Looking more broadly, we also have some significant tailwinds for the market New Households: Millennials are leaving the family home in volume.

A lot of the big names on here have an aversion to inflating ARV(after repaired values) and Rent rates, so do your own research...

Second, I'm worried the appraised value will come back much lower than 85k since the price is undoubtedly inflated by the rental price.

You'll actually be losing money due to inflation.

All deals come with a mock settlement statement complete with repairs, closing costs, holding costs, and a realistic ARV...never inflated.  

I guess my concern is that these areas don't even seem to be keeping up with inflation. 

I do get the sense that the current set of owners is doing a value add, and I would expect the rent and/or water payment to go up over time anyway due to inflation. 

They will go through the property and upgrade it as much as humanly possible so they can get those up-charges.Given that context, you ought to verify whether they are real service calls or whether they are something you could consider as inflated business for the benefit of the management company.Then, you also need to consider the tenant.

Lien letter fees were somewhat inflated as they mistakenly added a commercial item to a residential property but most importantly - all the lien letter cost go to seller! 

With inflation you probably can raise the rent 25-100 bucks each year depending on the tenant.