Overall:
I think the location would be hard to beat. The neighbourhood may look a bit sketchy but one must think that this is the old part of the city and look for the charm of the site. Also I suggest looking for small little restaurants nearby (e.g., Verde Minho, which I'd not give much a shot had it not been the positive reviews on Trip Advisor), where one can get good food with the locals at a good price. The restaurants on the "main" Street (Augusta) may be good but felt too touristic.
Pros:
(1) Location, location, location.
(2) Despite the temperature in the city being reasonably high (we were there in June) the place was well ventilated and was always cool.
(3) Isabel was very responsive and was waiting for us in the street(!) to make sure we'd not get lost. She was ready with suggestions of what to do and how to get around.
Cons:
(1) The apartment is in the 4th floor (83 steps!). This is no one's fault really, but one cannot ignore the fact that hauling a 20+Kg up isn't a trivial feat (likewise at the end of the day after walking 10 Km up and down around the city), so consider that before committing.
(2) The bathroom is tiny, really tiny. I can see people who are XX-size having difficulty in the shower (which acted more like a big faucet really and drained slowly).
(3) The double bed is noisy. Not a deal breaker but still kind of annoying (should be an easy fix though).
(4) The neighbourhood can be a bit noise at night but nothing that shutting the windows wouldn't solve. Not a deal breaker.