Also it located in a very bad area so there will be a lot of evictions I am told.

Also, if the main line is bad, its likely a matter of time until the other pipes start to give you issues. 

Is this just a bad time to try to cash out refi?

I'd recommend finding an agent who's familiar with the area and has RE investment experience so he/she can show you where the good deals are (AND where to avoid the bad ones)!

Just to offer you an opposing opinion - driving down the principle and refinancing is putting a lot of your hard earned cash, that could be used for productive assets, into a bad asset.

They see median home prices running $600K or so, and those are influenced by all these cool developers ripping out the old and put up brand new crazy-gorgeous glamorous homes -- literally million dollar homes in some cases.There are several houses in that area, very similar, same everything, that have been fixed up (in their current size and floor plan configuration) and flipped for around $285K or so. 

It is a very hard market to bust into because the older housing such bad shape and banks willNot lend.

Not to say it’s the bad choice, but it impacts your numbers and potential exit.

Used units have no warranty , in one month when it goes bad you will be buying a new one .  

Could have just been bad luck on that deal so I wouldn't go as far to say the whole area is bad, but my personal experience wasn't great.