@Stefan D.I agree with the main consensus which is do nothing and rent it.However, if by upgrading you can increase the rent substantially do it.Additionally, better units attract better tenants and possibly less turnover, maybe more lease renewals.

What attracted you to them and what cemented the decision to move forward with them?

With Pismo Beach being primarily a tourist town, you would think they would welcome vacation rentals.

But frankly, in my opinion, buy and hold REI is not as attractive as it used to be in most markets. 

Or if not, how much would the market have to come down to make it attractive again?

People have slowed down taking vacations and owners of STRs who focus strictly on tourists are having difficulty.  

It seems like the cash flow potential for the price that you pay is certainly attractive.

I got an email not too long ago from Zillow it said my home was worth a lot more than I bought it for. my mortgage has a very attractive fixed rate so I didn't want to refinance my house so I started looking into other ways to utilize the equity to invest.

But the areas I found attractive are Indiana and Tennessee.

/Griscom StreetNorth: Cheltenham Ave.East: Tackawanna/Charles/Valley StreetIf the allure of the tax breaks associated with the zones attracts developers, a byproduct of their investments is that the properties in these areas will appreciate.