I've worked with this population in the past and the majority live in C or D class neighborhoods.

Using your analogy with the 2/1, you need to find it for lets say ~130k and it needs 70k worth of repairs/remodeling to give you an APR in the 250-300k range and make sure you can rent it for >2k a month. in order to make the greatest cash flow you need to find the most rundown houses to fix, or go on the less desirable areas. unfortunately that's where the majority of investors are as well. i'll give you an example of one i just completed. it is in an up and coming neighborhood. some parts are scary, while new construction of luxury townhouses are within a block. it's a duplex with a 3/1 and a 2/1 (i know i said i wouldn't usualy get these, but it was a really good deal).

Selling a property in the first 7ish years with a mortgage is not great because the strong majority of your mortgage payments are interest and the principal balance doesn't go down much. 

I think it would give a major jumpstart to rentals for me even though the only money made is in equity.

So the likely hood of a buyer wanting a major component to be replaced should be rare.

However, I do get calls for major plumbing repairs, air conditioners, and hurricane damage - hence the need to factor in maintenance.

For college rentals in Norman, OKC, or Edmond I factor in 8-10% vacancy as a standard, but that can be lowered using some tactics. 

It wasn't anything major, but certainly some work.

For instance, if one’s net worth is $500K, and most of its tied up in real estate, would it be a good idea to keep the next investment at $100K or less (20% of total net worth) from a diversification standpoint to prevent from devastating loss in the event something majorly goes wrong with the property?

Learn the process, the forms, the contingencies, negotiating tactics, comps, winning in competitive situations, how to take and price a listing...I could go on and on, but you get the idea.Good luck and let us know how you do.