It's more of the areas desirability from the stand point of a potential renter or owner occupant.  

And by great location, I know you mentioned desireable tourist areas like like cap hill or near 16th st mall...or am I just as well looking in Cerry creek area or Wash Park?

I have a 20 unit multifamily near the Pasadena City College in LA (this is rent control but considered pretty desirable and not likely to severely crash in a decline).

Is it typical for the ROI on the less desireable homes to be so much greater, or is this a situation where the numbers really only work out when you buy distressed properties? 

I see a correction coming too, maybe 15% in desirable market and 20% in speculative markets filled with investors

I don't know where your house is, but the numbers you're quoting imply that it's somewhere very close to the center of town, or possibly near one of the desirable multi-use developments such as Mueller or The Domain.

It appears we have very similar design desires.

Repurposing some of these old structures like this end up being some of the most desirable projects out there.

no, but Cozy reports to at least one of the credit unions, if tenant so desires.

If they had the capability/desire to self manage they would be listing it as an STR, not a LTR.