There isn't a right or a wrong to this and you can evolve emotionally as you become more confidant in your decision making.   

Buyers understood they were paying a premium but with recent appreciation trends we all felt confident that they would recoup the equity within 18-24 months.

Second, typically even if properties are in great shape you still will want to spend some money on repairs, typically one of the better ways to make money in real estate is to find properties that can have value added to them, via hiring contractors to do repairs and improve the property. 

Any amounts paid to improve a building, its structural components, or a "building system" is an improvement to the building. 

Thankfully, the house had been improved over the two years prior to illness, so there was a newer roof, A/C and PVC windows.  

I agree with @Greg H. make sure you are completely confident in that first investment, whatever it is.

We have a $1M Capital Expenditure (CapEx) budget that we are using to improve the property.

Getting that curly W is super for motivation.You might also consider adding Land Trust to your toolbox as a means to improve anonymity and for ease of transfer since you can simply assign beneficial interest. 

But if you are being super conservative with that amount and you are confident about the rent amount it can collect and feel comfortable with all aspects of the investment, go for it!

On the flip side, we've been shown houses that are in bad neighborhoods with no sign of improvement in the next 10 years, 1/2 way through an owner performed "remodel" that made the house considerably worse, cinderblock houses that will never have any appreciation, and the like.