Frankenstein house found - Thoughts on what to do with it

[Jeremy Michiels]

I just walked through a home in North Dallas yesterday that has gone through multiple modifications and add-ons. It's zoned as SFH, but currently housing 2 separate renters and the owner (think 3 plex). The owners split the house in two while enclosing the garage to create a 3/1 and 2/1, in addition they enclosed a back patio area to make an efficiency studio area 1/1 no kitchen.

Asking price is $185. ARVs in the area for 3/2s are $220-$240k.  It needs new flooring throughout (about 1600 sq ft), paint, some windows need replacement, A/C units are 10+ years (there are 2). The second kitchen would need to be gutted and the house remerged together. Bathrooms need updating (there are 3 total) I believe the enclosed back patio is out of code, built on insufficient foundation. There is some foundation concerns also. Lot size is smaller. Close to good schools. Land value is ~40k per tax roles.

Question for rehabbers out there. What kind of offer would you put on something like this? Would you approach from a Gut and rebuild or is this better suited for a tear down? 

I have no interest in pursuing it, but am highly curious if there are strategies that may make this worthwhile.