I was considering of using the Zillow API but from what I hear, the data isn't the most reliable.

The problem is in utilizing it when there is not reliable market data on cap rates for small residential properties.

The cost of this "improvement" is an important, decision-making piece of data (because if I can't unload this cost onto the tenants, the deal won't work). 

They go on to say that the data is collected from public or user submitted data, real estate agents, appraiser physical inspect of the home.

What is your tolerance and where do you go for data?

I have a huge data base of people transitioning from modification to Short Sale.

I have to admit I am fascinated by it and my curiosity is coming up with more questions than I have knowledge or answers for.I see many posts in the forums that mention the neighborhoods people are invested or looking to invest in rated on a graded scale..... this neighborhood is a "B' for example.How does everyone analyze and what data points are commonly used to come up with and then assign this "grade"??

From the county records of how much a property transferred to, to demographic and employment data, rental rates on zillow, trulia, rent-o-meter, street view, birds eye view, etc etc etc.  

Software like Argus and/or customized spreadsheets can given you precise data if you feel like your crystal ball is better than the next investors' ball.

Ideally, you'd want to be armed with some data before you call them (perhaps what other apartment buildings in your area are being charged per dumpster, per pickup).