How do you know if you need to gut the project and put in new sheetrock ?

I have this property under contract I have had multiple cashbuyers go see the property its a 3b 1b the seller said it’s on a double lot but the lot it’s not big enough to split, however it’s a single family home and it’s a potential tear down it’s gutted it’s in real bad shape the seller ran out of capital that’s why he wants outs.

My instinct was to exclude those in my search as I think they would be less likely to rent (or to re-sell), but I'm aware it may just be exposing my lack of knowledge of other markets. 

Sanded and restained all hardwoods, gutted small powder room, remodeled bathroom (besides shower), and ripped out kitchen vinyl flooring with leftover hardwood that i had from my brothers house, redid countertops, and of course a new coat of paint in every room including ceilings.  

A couple months ago I was looking at a triplex that came up for sale in a close suburb,   long story short despite suffering from long term poor management, needing substantial exterior repairs, and having damage and 2 vacant and gutted units left over from tenants-from-hell it ended up selling to somebody else for 30% over asking,  needing another 20% of the asking price (at least) in repairs.  

We completely gutted the house and gave it a new functional modern interior layout.

I do a lot of full gut rehabs. 

Lakewood has a lot of doubles, but $100k is low for that area unless you get a full gut.

This would be the type of deal where you would be much better served doing a full gut rehab of the building and moving out all of the tenants in staggered groups as you rehab.

Why is this a complete gut job?