(e.g. stretching their budget thin, always improving or fixing something, tenant stories, snow removal, etc. - all of which I believe will pay off in just a couple of short years so I personally think these are great problems to have.) 

What we do is budget a big sum of money for capex when we purchase the property to cone in and fo the work to "reset" the plumbing day one. 

Budget, financing, etc?

I have had success with the code enforcement list in my area and used that when I first started out because I was on a tighter budget.

Do you currently have a budget?

Might be nice to live in the house for a bit, get a handle on the issues, and rehab when you know how to drive your rents up with the $40k rehab budget.  

My wife and I both have a steady income, and we hope to purchase within the next year, but it is taking careful planning and budgeting for us to reach a down payment that is large enough for where we live (Fort Collins, CO - median house value: $343,200 [http://www.zillow.com/fort-collins-co/home-values/]). 

Due to my limited budget, I can only see the trustee sale number.  

I would not recommend hard money for your first few deals because you may get hosed by the costs of financing if you take too long or if you are over budget which are normal problems for younger in their career investors.

A small increase like this wont scare away current tenants but will prevent you from having to do a $100 increase in 5 years, which could price a rental out of someone's budget.