As is, the owner is rent rolling $2,000/m with just 2 units occupied and paying rent.She wants to hold on to the property and make capital improvements over time. 

You can hold it, it has positive cashflow4) Real estate allows you to create equity by rehabbing or improving the asset5) Real Estate cycles are local and not uniform across asset classes.

The city of Allentown has seen a lot of growth over the last few years due to some Neighborhood Improvement Zone incentives.

Depending on the way things are now, there could be an opportunity to improve the listing with better photos, upgraded amenities and a refresh.

The owner hasn't improved it and Pgh hasn't appreciated that much in two years.

Here is an article that I found on the Veteran's United website because I am trying to do the same thing:https://www.veteransunited.com/valoans/va-rehab-loans/The article states:"Here's what you can do:Repair or add new windows, doors, or sidingRepair or add new roof or guttersInstall new HVAC systems or water heatersImprove insulationWeatherizeTreat mold, lead paint, or moldMake updates to improve energy efficiencyRepair or replace the flooringRepair or replace electrical or plumbing systemsAccessibility updatesIn general, the project has to improve the property's livability and value and must become a permanent part of the home."

To clarify: You mentioned appreciation of $800k But gain will be Calculated as:Sale price <Less> Adjusted basis (purchase price + purchase costs- depreciation)<Less> Improvements you made <Less > Selling costs 

This will help forecast your expected numbers and improve your underwriting skills.I cannot put a price tag on what I learned from this experience.

I am evaluating a few options to improve this situation, one is "status quo" i.e wait another year and then decide since the next rent increase will improve the situation a little, two is to add a detached ADU which I have researched to confirm both feasibility and strong economics, and three is to see about selling the property as a development lot for multifamily, then using the proceeds on another investment. 

Non ad valorem would be taxes that are evenly applied to all properties regardless of value on a per-property basis, commonly for community road improvements, new fire stations, CDD (community development district), or other items like that which impact a small part of the county which those seeing benefit repay over a period of time.