What happens if the furnace needs to be replaced?  

The forced appreciation comes in here because rents were lagging the market at both properties, and we are also doing some small upgrades that drive rents, like replacing worn carpets with vinyl laminate wood-grain flooring rather than new carpets.  

Things like replacing a roof, siding, new water heaters, etc. 

Maybe the carpet needs to be replaced right away. 

the prior owner had already replaced a significant portion of the sewer lines so that must have helped.

Well that didn't work out and we ended up replacing the windows for $3k.  

New ones in my area generally run about $10K to replace.

The home needs a roof and siding replaced to make it look presentable, the inside has already been inspected and approved for tenancy.I have 16k cash on hand, how would it best suit me to proceed with the financing to benefit cash flow and taxes?

If the place has a bad reputation, 342 units is a lot of tenants to cycle through and replace, and you will need to do something pretty dramatic to get stronger tenants into the community while the majority of old tenants remain.Thus, rather than think about gentrification, you should assume that the area will stay the same, and focus on getting the property for a price where the current cash flow provides the return you desire.  

If you hold this property long enough, EVERYTHING will have to be repaired / replaced.