Advice needed on how to account for differed Cap-Ex in offer

[Mike Montana]

So I have been analyzing an opportunity to purchase a property with 33 units. After doing the Preliminary evaluation of expenses and revenue we come to the conclusion of what we believe the property is worth on paper. In our calculations, we have good margins for maintenance expenses as well as building reserves for Cap-Ex, which are based on the seller's numbers and our experience with some smaller multi-family properties we currently own.  In looking at the current rent roll it does appear there's opportunity in bringing rents to current market value. We believe we can accomplish that through some upgrades to the property and have been successful in the past through good management of properties.  there also may be some opportunity to reduce utility expenses. 

The owner claims to have done some recent capital expenditures over the past year but with a quick drive-by of the property, not even going into Official due diligence, it is evident that the 5 building property will need some immediate attention to the exterior. Paint, blacktop, roofs, and landscape to name a few. My question would be, if the numbers support a $1M purchase price and there is conservative $100K worth of deferred capital expenditures, do you write your letter of intent for $900K? Thanks in advance for your input.