Some neighborhoods of DC actually went up in value during the housing collapse including Shaw, Petworth, Brightwood, Trinidad.A much more likely scenario than a market correction is prices continue to appreciate, and interest rates continue to rise.

Trump this year has reduced the long term capital tax gain rate to a great deal.  

The tenant may withhold the difference between the old rent rate and the new increased rate.

Success rates with collection agencies are extremely low, probably around 10 - 15%.In both cases, you are unlikely to get any money.

In addition, once you've freed up your equity in your current home and invested it in income-producing real estate assets, consider applying for a couple of FHA multi-family property loans (4 units or lease) which have competitive rates and low down-payments (3.75% at the time of writing this). 

Rates are higher than conventional but there are perks, like the fact that they don't require proof of income/DTI, lend to LLCs, and close quicker. 

He is paying $550/month but it seems like the market rate rent is between $700-$750/month.

This is the short hand way of how lenders underwrite MF so you should too.Figure out the average cap rate for the area and compare if you are over paying or found a good deal. 

What are the rate and terms?

I seem to get stuck trying to determine the cap rate in markets I am not too familiar with and was wondering if there was a source out there to look up?