Knowing that, if I did buy the property, I may slightly increase rents at renewal time.

. $100k under the county appraisal is not to low - just work with your numbers. you can put it on paper with 30 working days Due Diligence clause and option to increase it by another 21 days. 

It's full of dings, dents, scratches (I live in South Philly, nothing but street parking), missing a hub cap, and its in "crap gold" color.

For example, things like vacancy, no payment, rent increases, late fees are all going to affect the actual number.

They have some really wonderful colors/styles, tile has came a loooooong way and is really great now!   

Your overall cash flow will increase as well as your ROI and you will still have $1.6mm in equity.

Investors also assume that property prices rise and debt is paid down - another way of increasing overall equity over time which is not just a measure of prices. 

The absence of a utility bill increasingly overcomes the aesthetic arguments of roof vents and satellite dishes being impacted by a solar array.

https://www.har.com/content/newsroom/Highlights: Single-family home sales rose 5.3 percent year-over-year, with 5,260 units sold;Days on Market (DOM) for single-family homes decreased slightly from 67 days in February 2017 to 65 days this February;Total property sales increased 3.1 percent with 6,375 units sold;Total dollar volume climbed 4.5 percent to $1.7 billion;The single-family home median price rose 1.4 percent to $226,200, which represents a February high;The single-family home average price edged up 0.4 percent to a February high of $281,945;Single-family homes months of inventory shrank year-over-year from a 3.4-months supply to 3.2 months;Townhome/condominium sales fell 5.1 percent, with the average price up 2.0 percent to $210,887 and the median price up 4.6 percent to $170,000;Leases of single-family homes fell 11.5 percent with the average rent up 4.1 percent to $1,720;Volume of townhome/condominium leases dropped 11.5 percent with average rent up 2.2 percent to $1,515.

When I say "capitalize", think of it as just increasing the book value of the inventory... it doesn't have anything to do with an investment asset as the word may make you think.You will record "cost of goods sold" when you actually sell the property.