I'm looking into buying the first investment property, and it seems like the only thing I can afford at the moment is properties from a low-income neighborhood without putting me into significant financial risk. 

This is not uncommon as most small developers try to avoid involving the City in light renovation, but this seems to be more than light reno work.Is there a way to still make this deal work?

Because it was in a small town, the city got wind of it and got involved and required me to get permits for everything and bring everything up to code.

You can buy it, it's something you can work so why risk losing it?

Some of the returns have been really insane for some of them, but of course very risk as some have dropped a lot too.

It's a lot of risk with not a whole lot of return. 

Rentfaxpro will also evaluate the management risk. 

Major Giuliani had to get involved back in the day because of zoning issues and what not.

Your 4.8% return on capital should be 12%-15% for the size and risk of this deal.  

In most states, the insurance companies have to file their underwriting guidelines stating what guidelines are used to determine if a risk is eligible or not eligible.